SEC Filing - IMPAC Mortgage Holdings, Inc.

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 1996

REGISTRATION NO. 333-04011
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1 TO FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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20371 IRVINE AVENUE
SANTA ANA HEIGHTS, CALIFORNIA 92707
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

JOSEPH R. TOMKINSON
CHIEF EXECUTIVE OFFICER
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
20371 IRVINE AVENUE
SANTA ANA HEIGHTS, CALIFORNIA 92707
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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COPIES TO:

THOMAS J. POLETTI, ESQ. JUDITH R. THOYER, ESQ.
MARK J. KELSON, ESQ. PAUL, WEISS, RIFKIND,
KATHERINE J. BLAIR, ESQ. WHARTON & GARRISON
FRESHMAN, MARANTZ, ORLANSKI, 1285 AVENUE OF THE AMERICAS
COOPER & KLEIN NEW YORK, NEW YORK 10019-6064
9100 WILSHIRE BOULEVARD, 8TH FLOOR TELEPHONE: (212) 373-3000
BEVERLY HILLS, CALIFORNIA 90212 FACSIMILE: (212) 757-3990
TELEPHONE: (310) 273-1870
FACSIMILE: (310) 274-8357

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.

CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OR REGISTRATION STATEMENT OF INFORMATION
REQUIRED BY ITEMS 1-29
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)

FORM S-11 ITEMS NUMBER AND CAPTION CAPTION IN PROSPECTUS OR PAGE REFERENCE
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1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus......................... Forepart of Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front Cover Page of Prospectus; Outside
Back Cover Page of Prospectus
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................ Prospectus Summary; Risk Factors
4. Determination of Offering Price..... Outside Front Cover Page of Prospectus; Under-
writing
5. Dilution............................ *
6. Selling Security Holders............ *
7. Plan of Distribution................ Outside Front Cover Page of Prospectus; Under-
writing; Dividend Reinvestment Plan
8. Use of Proceeds..................... Prospectus Summary; Use of Proceeds
9. Selected Financial Data............. Selected Financial Data
10. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations
11. General Information as to
Registrant......................... Prospectus Summary; The Company: Business;
Imperial Credit Mortgage Holdings, Inc.; Imperial
Credit Advisors, Inc.
12. Policy with Respect to Certain
Activities......................... Inside Front Cover Page of Prospectus; Risk Fac-
tors; Business; Description of Capital Stock;
Additional Information
13. Investment Policies of Registrant... Prospectus Summary; Risk Factors; Business;
Imperial Credit Mortgage Holdings, Inc.; Imperial
Credit Advisors, Inc.
14. Description of Real Estate.......... *
15. Operating Data...................... *
16. Tax Treatment of Registrant and Its
Security Holders................... Prospectus Summary; Risk Factors; Federal Income
Tax Considerations; ERISA Investors
17. Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters........ Price Range of Common Stock; Dividend Policy and
Distributions; Principal Stockholders; Imperial
Credit Mortgage Holdings, Inc.; Imperial Credit
Advisors, Inc.; Shares Eligible for Future
Sale; Underwriting
18. Description of Registrant's
Securities......................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Description of Capital
Stock; Federal Income Tax Considerations; ERISA
Investors
19. Legal Proceedings................... Business
20. Security Ownership of Certain
Beneficial Owners and Management... Outside Front Cover Page of Prospectus;
Principal Stockholders
21. Directors and Executive Officers.... Imperial Credit Mortgage Holdings, Inc.;
Imperial Credit Advisors, Inc.
22. Executive Compensation.............. Imperial Credit Mortgage Holdings, Inc.;
Imperial Credit Advisors, Inc.
23. Certain Relationships and Related
Transactions....................... Certain Transactions; Risk Factors; Imperial
Credit Mortgage Holdings, Inc.; Imperial Credit
Advisors, Inc.; Relationships with Affiliates
24. Selection, Management and Custody of
Registrant's Investments........... Risk Factors; Imperial Credit Mortgage Holdings,
Inc.; Imperial Credit Advisors, Inc.;
Relationships with Affiliates
25. Policies with Respect to Certain
Transactions....................... Certain Transactions; Risk Factors; Business;
Imperial Credit Mortgage Holdings, Inc.;
Imperial Credit Advisors, Inc.; Relationships
with Affiliates
26. Limitations of Liability............ Imperial Credit Mortgage Holdings, Inc.;
Imperial Credit Advisors, Inc.
27. Financial Statements and
Information........................ Independent Auditors' Reports; Selected Finan-
cial Data;
28. Interests of Named Experts and
Counsel............................ Legal Matters; Experts
29. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ *

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* Not Applicable

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED MAY 30, 1996

2,500,000 SHARES

[LOGO of ICMH]
COMMON STOCK

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All of the shares of Common Stock offered hereby are being sold by Imperial
Credit Mortgage Holdings, Inc. (the "Company"). The Common Stock is listed on
the American Stock Exchange (the "AMEX") under the symbol "IMH". On May 29,
1996, the last reported sale price of the Common Stock as reported by the AMEX
was $15.75 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" STARTING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY. THESE RISKS INCLUDE:

. Changes in Interest . Recent and Planned Expansion; Reliance on ICII's
Rates; Prepayment Origination Capability
Risks . Competition for Mortgage Loans
. Hedging Strategies . Experience of the Manager in Managing a REIT
. Risks Relating to . Consequences of Failure to Maintain REIT Status;
Operations Company Subject to Tax as a Regular Corporation
. Risks of Potential Net . Investment Company Act Risk
Interest and . Preferred Stock; Restrictions on Ownership of
OperatingLosses in Common Stock; Anti-Takeover Risk
Connection with
Borrowings
andSubstantial
Leverage; Liquidity
. Demand for Residential
Mortgage Loans and the
Company's Non-
Conforming Loan
Products
. Limited History of
Operations

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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Underwriting
Price to Discounts and Proceeds to
Public Commissions (1) Company (2)
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Per Share........................ $ $ $
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Total............................ $ $ $
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Total Assuming Full Exercise of
Over-Allotment Option (3)....... $ $ $

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(1) See "Underwriting."
(2) Before deducting expenses estimated at $750,000, all of which are payable
by the Company.
(3) Assuming exercise in full of the 45-day option granted by the Company to
the Underwriters to purchase up to 375,000 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."

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The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject any orders in whole or in part. It is expected
that delivery of the Common Stock will be made in New York City on or about
, 1996.

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PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
STIFEL, NICOLAUS & COMPANY
INCORPORATED
EVEREN SECURITIES, INC.

THE DATE OF THIS PROSPECTUS IS , 1996

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document referred as an exhibit to the Registration Statement. A copy
of the Registration Statement may be inspected without charge at the offices
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 upon
the payment of the fees prescribed by the Commission.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports and other information with the Commission.
The Registration Statement, including the exhibits and schedules thereto, as
well as such reports and other information filed by the Company with the
Commission, can be inspected, without charge, and copied at the public
reference facilities maintained by the Commission at the office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, and at
the following Regional Offices of the Commission: 7 World Trade Center, New
York, New York 10048, Suite 1300; and 500 West Madison Street, Chicago,
Illinois 60661, Suite 1400. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C, 20549 upon the payment of the fees prescribed by the
Commission. Reports, proxy statements and other information concerning the
Company can be inspected at the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and related notes
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. Unless the context otherwise requires, references
herein to the "Company" refer to Imperial Credit Mortgage Holdings, Inc.
("IMH"), ICI Funding Corporation ("ICIFC") and Imperial Warehouse Lending
Group, Inc. ("IWLG"), collectively. References to "IMH" under "Federal Income
Tax Considerations" refer to IMH and IWLG, collectively. References in this
Prospectus (except for references in the section entitled "Federal Income Tax
Considerations") to "IMH" refer to Imperial Credit Mortgage Holdings, Inc. as a
separate entity from ICIFC and IWLG. Capitalized and certain other terms used
herein shall have the meanings assigned to them in the Glossary.

THE COMPANY

Imperial Credit Mortgage Holdings, Inc. is a recently-formed specialty
finance company, which operates three businesses: (1) the Long-Term Investment
Operations, (2) the Conduit Operations, and (3) the Warehouse Lending
Operations. The Long-Term Investment Operations is a recently-created business
that invests primarily in non-conforming residential mortgage loans and
securities backed by such loans. The Conduit Operations primarily purchases and
sells or securitizes non-conforming mortgage loans, and the Warehouse Lending
Operations provides short-term lines of credit to originators of mortgage
loans. These two businesses include certain ongoing operations contributed to
the Company by Imperial Credit Industries, Inc. ("ICII"), a leading specialty
finance company, on November 20, 1995 (the "Contribution Transaction"). IMH is
organized as a real estate investment trust ("REIT") for tax purposes, which
allows it generally to pass through earnings to stockholders without federal
income tax at the corporate level.

Long-Term Investment Operations. The Long-Term Investment Operations,
conducted by IMH, invests primarily in non-conforming residential mortgage
loans and mortgage-backed securities secured by or representing interests in
such loans and, to a lesser extent, in second mortgage loans. Non-conforming
residential mortgage loans are residential mortgages that do not qualify for
purchase by government-sponsored agencies such as the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
Such loans generally provide higher yields than conforming loans. The principal
differences between conforming loans and non-conforming loans include the
applicable loan-to-value ratios, the credit and income histories of the
mortgagors, the documentation required for approval of the mortgagors, the type
of properties securing the mortgage loans, the loan sizes, and the mortgagors'
occupancy status with respect to the mortgaged properties. Second mortgage
loans are higher yielding mortgage loans made to borrowers owning single-family
homes, for the purpose of debt consolidation, home improvements, education and
a variety of other purposes. At March 31, 1996, the Company's investment
portfolio consisted of $311.5 million of non-conforming mortgage loans and
$33.2 million of mortgage-backed or other collateralized securities.

IMH with non-conforming mortgage loans and securities backed by such loans at
costs which are lower than would be available through third parties. For the
three months ended March 31, 1996, ICIFC acquired $280.7 million in mortgage
loans and sold $314.9 million of mortgage loans to the Long-Term Investment
Operations. During the years ended December 31, 1995 and 1994, ICIFC acquired
mortgage loans from its correspondents, including ICII after the Contribution
Transaction, in the amounts of $1.1 billion and $1.7 billion, respectively.
Prior to the Contribution Transaction, ICIFC was a division or subsidiary of
ICII since 1990. IMH owns 99% of the economic interest in ICIFC while ICII is
the holder of all the outstanding voting stock of ICIFC. At March 31, 1996,
ICIFC maintained relationships with 223 correspondents.

Warehouse Lending Operations. The Warehouse Lending Operations, conducted by
IWLG, provides short-term lines of credit to ICIFC and approved mortgage banks,
most of which are correspondents of ICIFC, to finance mortgage loans during the
time from the closing of the loans to their sale or other settlement with pre-
approved investors. At March 31, 1996, the Warehouse Lending Operations had
$196.1 million in net finance receivables outstanding, of which $173.4 million
was outstanding with ICIFC.

IMH's principal sources of net income are (1) net income from its Long-Term
Investment Operations, (2) dividends from the Conduit Operations at ICIFC,
which are fully subject to federal and state income taxes, and (3) net income
from the Warehouse Lending Operations. The principal source of income from its
Long-Term Investment Operations is net interest income, which is the net spread
between interest earned on mortgage loans and securities held for investment
and the interest costs associated with the borrowings used to finance such
loans and securities. The principal sources of income from ICIFC are gains
recognized on the sale of mortgage loans and securities, net interest income
earned on loans purchased by ICIFC pending their securitization or resale,
servicing fees, commitment fees and processing fee income. The principal
sources of income from IWLG are the net spread between interest earned on
short-term lines of credit (warehouse loans) and the interest costs associated
with the borrowings used to finance such loans and the fee income received from
the borrowers in connection with such short-term borrowings.

RECENT OPERATING RESULTS.

For the three months ended March 31, 1996, the Company's first full quarter
of operations, the Company earned $1.7 million or $0.39 per share. On April 16,
1996 the Company declared a dividend of $0.39 per share payable on April 30,
1996, to stockholders of record as of April 24, 1996. On May 29, 1996 the
Company declared a dividend of $0.45 per share payable on July 2, 1996 to
stockholders of record as of June 13, 1996.

OPERATING STRATEGY

The Company believes that a structural change in the mortgage banking
industry has occurred which has increased demand for higher yielding non-
conforming mortgage loans. This change has been caused by a number of factors,
including: (1) investors' demand for higher yielding assets due to historically
low interest rates over the past few years; (2) increased securitization of
high-yielding non-conforming mortgage loans by the investment banking industry;
(3) quantification and development of standardized credit criteria by credit
rating agencies for securities backed by non-conforming mortgage loans; (4)
increased competition in the securitization industry, which has reduced
borrower interest rates and fees, thereby making non-conforming mortgage loans
more affordable; and (5) the end of the refinance "boom" of 1992 and 1993,
which has caused many mortgage banks, attempting to sustain origination volume,
to seek out non-conforming mortgage loan borrowers.

The Company's strategy is to take advantage of the increased demand for non-
conforming mortgage loans through ICIFC's network of correspondents, which
sells non-conforming mortgage loans to ICIFC for resale or securitization. The
Company's strategic objective is to exploit the structural changes in the non-
conforming mortgage loan market through the Conduit Operations and to invest in
the non-conforming mortgage loans and

mortgage-backed securities originated and created by its Conduit Operations.
Management believes that the Long-Term Investment Operations complements the
Conduit Operations by providing ICIFC with a reliable investor for a portion of
its loan sales and securitizations while ICIFC supports the Long-Term
Investment Operations by providing mortgage loans and mortgage-backed
securities at costs which are lower than would be available from third parties.
The Company believes the Warehouse Lending Operations provide synergies with
the Company's other operations because they extend the scope of the Company's
relationships with certain of its correspondent loan originators.

The Company purchases, through its network of correspondents, and invests a
substantial portion of its portfolio in non-conforming mortgage loans because
management believes that there is a large demand for non-conforming mortgage
loans and because non-conforming mortgage loans provide an attractive net
earnings profile and produce higher yields without commensurately higher credit
risks when compared with conforming mortgage loans. The Company's strategy is
to increase the percentage of "B" and "C" grade mortgage loans purchased
through the Conduit Operations, as well as increasing the portion of such loans
for its investment portfolio at the Long-Term Investment Operations. In
general, "B" and "C" grade mortgage loans are residential mortgage loans made
to borrowers with lower credit ratings than borrowers of higher credit quality,
or so called "A" grade mortgage loans, and are normally subject to greater
frequency of losses and delinquency. As a result, "B" and "C" grade mortgage
loans normally bear a higher rate of interest and higher fees.

Management believes that IMH's tax and corporate structure as a REIT provides
it with an advantage over other financial institutions and mortgage banking
competitors. As a REIT, IMH can generally pass through earnings to stockholders
without federal income tax at the corporate level. Thus, the Company expects to
be able to pay higher annual dividends than traditional mortgage lending
institutions, which are subject to federal income tax. In addition, management
believes that the Company provides a more attractive method of investing in
mortgages than regulated financial institutions because the Company is not
subject to most of the federal and state regulations imposed upon insured
financial institutions, and therefore, will not incur their related costs.

DIVIDEND POLICY AND DISTRIBUTIONS

To maintain its qualification as a REIT, IMH intends to make annual
distributions to stockholders of at least 95% of its taxable income (which does
not necessarily equal net income as calculated in accordance with GAAP)
determined without regard to the deduction for dividends paid and by excluding
any net capital gains. IMH declared its initial dividend of $0.08 per share on
January 25, 1996 for the period of November 20, 1995 through December 31, 1995
(the "Interim Period"), a dividend of $0.39 per share on April 16, 1996 for the
quarter ended March 31, 1996, and a dividend of $0.45 per share on May 29,
1996. Any taxable income remaining after the distribution of the regular
quarterly dividends will be distributed annually in a special dividend on or
prior to the date of the first regular quarterly dividend payment date of the
following taxable year. The dividend policy is subject to revision at the
discretion of the Board of Directors. All distributions in excess of those
required for IMH to maintain REIT status will be made by the Company at the
discretion of the Board of Directors and will depend on the taxable earnings of
the Company, the financial condition of IMH and such other factors as the Board
of Directors deems relevant. The Board of Directors has not established a
minimum distribution level.

The Company has adopted a Dividend Reinvestment Plan ("DRP") that allows
stockholders who have enrolled in the DRP to reinvest their dividends
automatically in additional shares of Common Stock at the DRP Purchase Price,
which is 97% of the then current market price of such stock. The shares of
Common Stock to be acquired for distribution under the DRP may be purchased on
the open market or directly from the Company at the option of the Company. See
"Dividend Reinvestment Plan."

THE MANAGER

Imperial Credit Advisors, Inc. ("ICAI" or the "Manager"), a wholly-owned
subsidiary of ICII, oversees the day-to-day operations of the Company, subject
to the supervision of the Company's Board of Directors, pursuant to a
management agreement (the "Management Agreement") which became effective on
November 20, 1995. The Manager is involved in three primary activities: (1)
asset-liability management--primarily the analysis and oversight of the
acquisition, financing and disposition of Company assets; (2) capital
management--primarily the oversight of the Company's structuring, analysis,
capital raising and investor relations activities; and (3) operations
management--primarily the oversight of IMH's operating subsidiaries. ICIFC
conducts the Conduit Operations under substantially identical principles,
practices and policies implemented when it was a division of ICII. The Manager
oversees the operations of ICIFC to ensure that such principles, practices and
policies are implemented and followed. The Management Agreement has an initial
term of one year, renewable annually by agreement between the Company and the
Manager, subject to the approval of a majority of the Unaffiliated Directors.
The Management Agreement may be terminated by either party at any time upon 60
days' written notice. In the event that the Management Agreement is terminated
or not renewed by the Company without cause, the Company is obligated to pay
the Manager a termination or non-renewal fee determined by an independent
appraisal. See "Imperial Credit Advisors, Inc.--Management Agreement."

The Manager is entitled to receive a per annum base management fee payable
monthly in arrears in an amount equal to (1) 3/8 of 1% of Gross Mortgage Assets
of IMH composed of other than Agency Certificates, conforming mortgage loans or
mortgage-backed securities secured by or representing interests in conforming
mortgage loans, plus (2) 1/8 of 1% of the remainder of Gross Mortgage Assets of
IMH plus (3) 1/5 of 1% of the average daily asset balance of the outstanding
amounts under IWLG's warehouse lending facilities. The Company also pays the
Manager, as incentive compensation for each fiscal quarter, an amount equal to
25% of the Net Income of the Company, before deduction of such incentive
compensation, in excess of the amount that would produce an annualized Return
on Equity equal to the Ten Year U.S. Treasury Rate plus 2% (the "25% Incentive
Payment"). "Return on Equity" is computed on Average Net Worth and has no
necessary correlation with the actual distributions received by stockholders.
The 25% Incentive Payment to the Manager is calculated quarterly in arrears
before any income distributions are made to stockholders for the corresponding
period. See "Imperial Credit Advisors, Inc.--Management Agreement" for a more
detailed explanation of the management fee arrangement and "Glossary" for full
definitions of the terms "Gross Mortgage Assets," "Net Income," "Return on
Equity," "Ten Year U.S. Treasury Rate" and "Average Net Worth."

THE OFFERING

Common Stock Offered by the
Company (1)...................... 2,500,000 Shares
Common Stock to be Outstanding
after the Offering (1)(2)........ 6,750,000 Shares
Use of Proceeds................... To provide funding for the Company's Long-
Term Investment Operations and its Warehouse
Lending Operations and for general corporate
purposes.
American Stock Exchange Symbol.... "IMH"

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(1) Assumes that the Underwriters' option to purchase up to an additional
375,000 shares of Common Stock to cover over-allotments is not exercised.
(2) Does not include 400,000 shares reserved for issuance pursuant to the
Company's Stock Option Plan, of which options to acquire 250,000 shares are
outstanding at a per share exercise price of $11.25 and options to acquire
45,000 shares are outstanding at a per share exercise price of $13.00. The
Company intends to increase the number of shares reserved for issuance
under its Stock Option Plan by 400,000 shares, subject to stockholder
approval, at the annual stockholders' meeting to be held in July 1996. See
"Imperial Credit Mortgage Holdings, Inc.--Stock Options."

RISK FACTORS

Before investing in the shares of Common Stock offered hereby, prospective
investors should give special consideration to the information set forth
below, in addition to the information set forth elsewhere in this Prospectus.
The following risk factors are interrelated and, consequently, investors
should treat such risk factors as a whole.

This Prospectus contains forward-looking statements that inherently involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in the following risk factors and
elsewhere in this Prospectus.

CHANGES IN INTEREST RATES; PREPAYMENT RISKS

The Company's earnings may be affected by changes in market interest rates.
In conducting its Conduit Operations, the Company is subject to the risk of
rising mortgage interest rates between the time the Company commits to
purchase mortgage loans at a fixed price and the time the Company sells or
securitizes those mortgage loans. An increase in interest rates will generally
result in a decrease in market value of loans that the Company has committed
to purchase at a fixed price, but has not yet sold or securitized.

Higher rates of interest may discourage potential mortgagors from
refinancing mortgage loans, borrowing to purchase a home or seeking a second
mortgage loan, thus decreasing the volume of mortgage loans available to be
purchased by the Conduit Operations. In addition, an increase in short-term
interest rates may decrease or eliminate or, under certain circumstances,
cause to be negative, the Company's net interest spread during the
accumulation of mortgage loans held for sale or the net interest spread on
mortgage loans held for investment when such loans are financed through
reverse repurchase agreements. Should short-term interest rates exceed long-
term interest rates (an "inverted yield curve" scenario), the negative effect
on the Company's net interest spread would likely be coupled with a reduction
in any earnings on any servicing portfolio held by the Company to the extent
prepayments on the underlying mortgage loans increased as long-term interest
rates declined.

In conducting its Long-Term Investment Operations, a significant portion of
the Company's mortgage assets held for long-term investment bear adjustable
interest ("ARMs") or pass-through rates based on short-term interest rates,
and substantially all of the Company's borrowings bear interest at fixed rates
and have maturities of less than one year. Consequently, changes in short-term
interest rates may significantly influence the Company's net interest income.
Mortgage loans owned by the Company that are ARMs or mortgage-backed
securities backed by ARMs are subject to periodic interest rate adjustments
based on objective indices such as the CMT Index or LIBOR. Interest rates on
the Company's borrowings are also based on short-term indices. To the extent
any of the Company's mortgage assets are financed with borrowings bearing
interest based on an index different from that used for the related mortgage
assets, so-called "basis" interest rate risk will arise. In such event, if the
index used for the subject mortgage assets is a "lagging" index (such as the
11th District Cost of Funds) that reflects market interest rate changes on a
delayed basis, and the rate borne by the related borrowings reflects market
rate changes more rapidly, the Company's net interest income will be adversely
affected in periods of increasing market interest rates. Additionally, the
Company's mortgage assets are subject to periodic interest rate adjustments
that may be less frequent than the increases or decreases in rates borne by
the borrowings or financings utilized by the Company. Accordingly, in a period
of increasing interest rates, the Company could experience a decrease in net
interest income or a net loss because the interest rates on borrowings could
adjust faster than the interest rates on the Company's ARMs or mortgage-backed
securities backed by ARMs. Moreover, ARMs are typically subject to periodic
and lifetime interest rate caps, which limit the amount an ARMs interest rate
can change during any given period. The Company's borrowings are not subject
to similar restrictions. Hence, in a period of rapidly increasing interest
rates, the Company could also experience a decrease in net interest income or
a net loss in the absence of effective hedging because the interest rates on
borrowings could increase without limitation by caps while the interest rates
on the Company's ARMs and mortgage-backed securities backed by ARMs would be
so limited. Further, some ARMs may be subject to periodic payment caps that
result in some portion of the interest accruing on the ARMs being deferred and
added to the principal

outstanding. This could result in less cash received by the Company on its
ARMs than is required to pay interest on the related borrowings, which will
not have such payment caps. The Company expects that the net effect of these
factors, all other factors being equal, will be to lower the Company's net
interest income or cause a net loss during periods of rapidly rising interest
rates, which could negatively impact the market price of the Common Stock. No
assurance can be given as to the amount or timing of changes in income. To the
extent that the Company utilizes short-term debt financing for fixed rate
mortgages or mortgage-backed securities backed by fixed rate mortgages, the
Company may also be subject to interest rate risks. To the extent that some of
the warehouse loans made by the Company bear interest based upon an
intermediate-term index while the Company's borrowings to fund such loans bear
interest based upon a short-term index, the Company will be subject to the
risk of narrowing interest rate spreads.

Higher rates of interest may have a negative effect, in particular, on the
yield of any Company portfolio of "principal only" securities and other types
of mortgage-backed securities purchased at a discount. If under such
circumstances the Company were required to dispose of any "principal only"
securities held in its portfolio, a loss could be incurred. Lower long-term
rates of interest may negatively affect the yield on any Company portfolio of
"interest only" securities, servicing fees receivable, master servicing fees
receivable and other mortgage loan and mortgage-backed securities purchased at
a premium. It is also possible that in certain low interest rate environments
the Company would not fully recoup any initial investment in such securities
or investments. See "--Risks of Potential Net Interest and Operating Losses in
Connection with Borrowing and Substantial Leverage; Liquidity."

Mortgage prepayment rates vary from time to time and may cause changes in
the amount of the Company's net interest income. Prepayments on ARMs and
mortgage-backed securities backed by ARMs generally increase when mortgage
interest rates fall below the then current interest rates on such ARMs.
Conversely, prepayments of such mortgage loans generally decrease when
mortgage interest rates exceed the then-current interest rate on such mortgage
loans. Prepayment experience also may be affected by the geographic location
of the property securing the mortgage loans, the credit grade of the mortgage
loan, the assumability of the mortgage loans, the ability of the borrower to
convert to a fixed-rate loan, conditions in the housing and financial markets
and general economic conditions. In addition, prepayments on ARMs are affected
by conditions in the fixed-rate mortgage market. If the interest rates on ARMs
increase at a rate greater than the interest rates on fixed-rate mortgage
loans, prepayments on ARMs will tend to increase. In periods of fluctuating
interest rates, interest rates on ARMs may exceed interest rates on fixed-rate
mortgage loans, which may tend to cause prepayments on ARMs to increase at a
greater rate than anticipated. Prepayment rates also vary by credit grade. For
the three months ended March 31, 1996 and the Interim Period, 63.4% and 31.9%,
respectively, of the loans acquired by the Company were non-conforming "A"
grade mortgage loans, as defined by the Company, which may be subject to
higher rates of prepayment than lesser credit grades of non-conforming loans.
Second mortgage loans generally have smaller average principal balances than
first mortgage loans and are not viewed by borrowers as permanent financing.
Accordingly, second mortgage loans may experience a higher rate of prepayment
than first mortgage loans. In addition, any future limitations on the right of
borrowers to deduct interest payments on mortgage loans for Federal income tax
purposes may result in a higher rate of prepayment mortgage loans. See
"Business--Conduit Operations--Marketing and Production."

Prepayments of mortgage loans could affect the Company in several adverse
ways. A substantial portion of the ARMs acquired by the Company (either
directly as mortgage loans or through mortgage-backed securities backed by
ARMs) have been newly originated within six months of purchase and generally
bear initial interest rates which are lower than their "fully-indexed" rates
(the applicable index plus the margin). In the event that such an ARM is
prepaid prior to or soon after the time of adjustment to a fully-indexed rate,
the Company will have experienced an adverse effect on its net interest income
during the time it held such ARM compared with holding a fully-indexed ARM and
will have lost the opportunity to receive interest at the fully indexed rate
over the expected life of the ARM.

The prepayment of any mortgage loan that had been purchased at a premium by
the Company would result in the immediate write-off of any remaining
capitalized premium amount and a consequent decrease in the

Company's interest income. The Long-Term Investment Operations' strategy at
the present time contemplates the purchase of certain mortgage loans on a
"servicing released" basis (i.e., the Company will acquire both the mortgage
loans and the rights to service them). This strategy requires payment of a
higher purchase price by the Company for the mortgage loans, and to the extent
a premium is paid, the Company is more exposed to the adverse effects of early
prepayments of the mortgage loans, as described above.

HEDGING STRATEGIES

To mitigate risks associated with its Conduit Operations, the Company,
through ICIFC, enters into transactions designed to hedge interest rate risks,
which may include mandatory and optional forward selling of mortgage loans or
mortgage-backed securities, interest rate caps, floors and swaps and buying
and selling of futures and options on futures. To mitigate risks associated
with its Long-Term Investment Operations, the Company's policy is to attempt
to match the interest rate sensitivities of its adjustable rate mortgage
assets held for investment with the associated liabilities. The Company may
purchase interest rate caps, interest rate swaps or similar instruments to
attempt to mitigate the cost of its variable rate liabilities increasing at a
faster rate than the earnings on its subject assets during a period of rising
interest rates. The nature and quantity of the hedging transactions for the
Conduit Operations and the Long-Term Investment Operations is determined by
the management of the Company based on various factors, including market
conditions and the expected volume of mortgage loan purchases, and there have
been no limitations placed on management's use of certain instruments in such
hedging transactions. No assurance can be given that such hedging transactions
will offset the risks of changes in interest rates, and it is possible that
there will be periods during which the Company could incur losses after
accounting for its hedging activities. See "Business--Hedging."

RISKS RELATING TO OPERATIONS

The Company makes long-term investments in mortgage loans and mortgage-
backed securities. The Company does not obtain credit enhancements such as
mortgage pool or special hazard insurance for its mortgage loans and
investments other than (1) FHA insurance, (2) VA guarantees and (3) private
mortgage insurance, in each case only when specified by its underwriting
criteria. Accordingly, during the time it holds mortgage loans for investment,
the Company is subject to risks of borrower defaults and bankruptcies and
special hazard losses that are not covered by standard hazard insurance (such
as those occurring from earthquakes or floods). In the event of a default on
any mortgage loan held by the Company, the Company bears the risk of loss of
principal to the extent of any deficiency between the value of the related
mortgaged property, plus any payments from an insurer or guarantor, and the
amount owing on the mortgage loan. Defaulted mortgage loans will also cease to
be eligible collateral for borrowings, and will have to be financed by the
Company out of other funds until ultimately liquidated.

Credit risks associated with non-conforming mortgage loans, especially "B"
and "C" grade loans, may be greater than those associated with conforming
mortgage loans that comply with FNMA and FHLMC guidelines. Non-conforming
mortgage loans generally consist of jumbo mortgage loans (loans with a
principal balance in excess of $207,000) or loans that are originated in
accordance with underwriting or product guidelines that differ from those
applied by FNMA or FHLMC. The principal differences between conforming loans
and the non-conforming loans purchased by the Company include the applicable
loan-to-value ratios, the credit and income histories of the mortgagors, the
documentation required for approval of the mortgagors, the types of properties
securing the mortgage loans, loan sizes and the mortgagors' occupancy status
with respect to the mortgaged property. As a result of these and other
factors, the interest rates charged on non-conforming loans are often higher
than those charged for conforming loans. The combination of different
underwriting criteria and higher rates of interest may lead to higher
delinquency rates and/or credit losses for non-conforming as compared to
conforming loans and could have an adverse effect on the Company's operations
to the extent that the Company invests in such loans or securities evidencing
interests in such loans.

In addition, with respect to second mortgage loans, the Company's security
interest in the property securing such loans is subordinated to the interest
of the first mortgage holder. If the value of the property securing the

second mortgage loan is not sufficient to repay the borrower's obligation to
the first mortgage holder upon foreclosure or if there is no additional value
in such property after satisfying the borrower's obligation to the first
mortgage loan holder, the borrower's obligation to the Company will likely not
be satisfied.

The Company also bears risk of loss on any mortgage-backed securities it
purchases in the secondary mortgage market or otherwise. To the extent third
parties have been contracted to insure against these types of losses, the
Company would be dependent in part upon the creditworthiness and claims paying
ability of the insurer and the timeliness of reimbursement in the event of a
default on the underlying obligations. Further, the insurance coverage for
various types of losses is limited in amount, and losses in excess of the
limitation would be borne by the Company.

The yield derived from certain classes of mortgage-backed securities created
in connection with securitizations by ICIFC and subsequently retained by the
Company, including, but not limited to, "interest only," "principal only" and
subordinated securities, is particularly sensitive to interest rate,
prepayment and credit risks. The Company's investment portfolio may include
each of these classes of securities, as well as investments in master
servicing fees receivable, which have characteristics comparable to "interest
only" securities insofar as their value tends to decline as prepayment rates
increase. See "--Changes in Interest Rates; Prepayment Risks." Because
subordinated securities, in general, bear all credit losses prior to the
related senior securities, the amount of credit risk associated with any
investment in such subordinated securities would be significantly greater than
that which would be associated with a comparable investment in the related
senior securities and, on a percentage basis, the risk would be greater than
holding the underlying mortgage loans directly. See "Business--Long-Term
Investment Operations--Investments in Mortgage-Backed Securities and Master
Servicing Fees Receivable."

As a warehouse lender, the Company is a secured creditor of mortgage bankers
and is subject to the risks associated with such businesses, including the
risks of fraud, borrower default and bankruptcy, any of which could result in
credit losses for the Company. Any claim of the Company as a secured lender in
a bankruptcy proceeding may be subject to adjustment and delay. See
"Business--Warehouse Lending Operations."

In connection with its Conduit Operations, ICIFC has engaged in
securitizations and bulk whole loan sales. In connection with the issuance of
mortgage-backed securities by ICIFC, such securities have been non-recourse to
ICIFC, except in the case of a breach of the standard representations and
warranties made by ICIFC when mortgage loans are securitized. While ICIFC has
recourse to the sellers of mortgage loans for any such breaches, there can be
no assurance of the sellers' abilities to honor their respective obligations.
ICIFC has engaged in bulk whole loan sales pursuant to agreements that provide
for recourse by the purchaser against ICIFC in the event of a breach of
representation or warranty made by ICIFC, any fraud or misrepresentation
during the mortgage loan origination process or upon early default on such
mortgage loans. ICIFC has generally limited the remedies of such purchasers to
the remedies ICIFC receives from the persons from whom ICIFC purchased such
mortgage loans. However, in some cases, the remedies available to a purchaser
of mortgage loans from ICIFC are broader than those available to ICIFC against
its seller, and should a purchaser exercise its rights against ICIFC, ICIFC
may not always be able to enforce whatever remedies ICIFC may have against its
sellers. ICIFC may from time to time provide provisions for loan losses
related to estimated losses from the breach of a standard representation and
warranty. ICIFC recorded a provision for loan losses related to such estimated
losses of $400,000 during the three months ended March 31, 1996. During the
three months ended March 31, 1996, no losses occurred and no loans were
repurchased by ICIFC. In 1995, 1994 and 1993, the impact of loans repurchased
as a result of borrower misrepresentations was not material.

RISKS OF POTENTIAL NET INTEREST AND OPERATING LOSSES IN CONNECTION WITH
BORROWINGS AND SUBSTANTIAL LEVERAGE; LIQUIDITY

The Company has employed a financing strategy to increase the size of its
investment portfolio by borrowing a substantial portion (up to approximately
98%, depending on the nature of the underlying asset) of the market value of
substantially all of its investments in mortgage loans and mortgage-backed
securities. The

Company initially intended maintaining a ratio of equity capital (book value
of stockholders' equity) to total assets of approximately 15%. This target
ratio was developed on the assumption that the Company would utilize the sale
of pass-through mortgage-backed securities as the primary securitization
technique, as compared to financing the loans in the Company's long-term
investment portfolio through CMOs. However, the Company has elected to utilize
CMO financings because CMOs allow the Company to more fully realize the
benefits of IMH's REIT tax status. CMOs receive financing treatment as opposed
to sale treatment. Financing treatment allows the Company to recognize spread
income over time as qualifying income under the REIT gross income tests, as
compared to gains at ICIFC for pass-through securites which receive sale
treatment and are fully taxable. The assets collateralizing CMO financings
remain on the Company's balance sheet, while assets backing pass-through
securities are removed from the balance sheet. Consequently, CMO financing
tends to increase the assets of the Company and reduce the Company's ratio of
equity capital to total assets, as compared to the sale of pass-through
securities. It is expected that the continued use of CMOs will likely result
in a ratio of equity capital to total assets of between 7% to 8%. The
Company's ratio of equity capital to total assets at March 31, 1996 was 8.0%
and the ratio at December 31, 1995 was 7.4%.

A majority of the Company's borrowings are collateralized, primarily in the
form of reverse repurchase agreements, which are based on the market value of
the Company's mortgage loans pledged to secure the specific borrowings. The
cost of borrowings under a reverse repurchase agreement corresponds to the
referenced interest rate (e.g., the CMT Index or LIBOR) plus or minus a
margin. The margin over or under the referenced interest rate varies depending
upon the lender, the nature and liquidity of the underlying collateral, the
movement of interest rates, the availability of financing in the market and
other factors. If the returns on the mortgage loans and mortgage-backed
securities purchased with borrowed funds fail to cover the cost of the
borrowings, the Company will experience net interest losses and may experience
net losses. See "Business--Long-Term Investment Operations."

The use of CMOs as financing vehicles tends to increase the Company's
leverage as such loans are held for investment rather than resold in secondary
market transactions. For this reason the Company is exposed to greater
potential credit losses from the use of CMOs as financing vehicles. In
addition, the retention of residual interests in mortgage loans sold through
secondary market transactions exposes ICIFC to a risk of credit loss up to the
amount of ICIFC's investment in the residual interest. Should the Company
experience credit losses greater than expected, the Company's financial
condition and results of operations would be materially adversely affected.

The ability of the Company to achieve its investment objectives depends not
only on its ability to borrow money in sufficient amounts and on favorable
terms but also on the Company's ability to renew or replace on a continuous
basis its maturing short-term borrowings. The Company's business strategy
relies on short-term borrowings to fund long-term mortgage loans. In the event
the Company is not able to renew or replace maturing borrowings, the Company
could be required to sell, under adverse market conditions, all or a portion
of its mortgage loans and mortgage-backed securities available-for-sale, and
could incur losses as a result. In addition, in such event the Company may be
required to terminate hedge positions, which could result in further losses to
the Company. Such events could have a materially adverse effect on the
Company.

Certain of the Company's mortgage loans may be cross-collateralized to
secure multiple borrowing obligations of the Company to a single lender. A
decline in the market value of such assets could limit the Company's ability
to borrow or result in lenders initiating margin calls (i.e., requiring a
pledge of cash or additional mortgage loans to reestablish the ratio of the
amount of the borrowing to the value of the collateral). The Company could be
required to sell mortgage loans under adverse market conditions in order to
maintain liquidity. If these sales were made at prices lower than the carrying
value of its mortgage loans, the Company would experience losses. A default by
the Company under its collateralized borrowings could also result in a
liquidation of the collateral, including any cross-collateralized assets, and
a resulting loss of the difference between the value of the collateral and the
amount borrowed. Additionally, in the event of a bankruptcy of the Company,
certain reverse repurchase agreements may qualify for special treatment under
the Bankruptcy Code, the effect of which is, among other things, to allow the
creditors under such agreements to avoid the automatic stay provisions of the
Bankruptcy Code and to liquidate the collateral under such agreements without
delay. Conversely, in the event of a bankruptcy of a party with whom the
Company had a reverse repurchase agreement,

the Company might experience difficulty repurchasing the collateral under such
agreement if it were to be repudiated and the Company's claim against the
bankrupt lender for damages resulting therefrom were to be treated simply as
one of an unsecured creditor. Should this occur, the Company's claims would be
subject to significant delay and, if and when received, may be substantially
less than the damages actually suffered by the Company. Although the Company
has entered into reverse repurchase agreements with several different parties
and has developed procedures to reduce its exposure to such risks, no
assurance can be given that the Company will be able to avoid such third party
risks. See "Business--Long-Term Investment Operations--Financing."

To the extent the Company is compelled to liquidate mortgage loans or
mortgage-backed securities classified as Qualified REIT Assets to repay
borrowings, IMH may be unable to comply with the REIT asset and income tests,
possibly jeopardizing IMH's status as a REIT. The Code does not provide for
any mitigating provisions with respect to the 30% gross income test.
Accordingly, if IMH failed to meet the 30% gross income test, its status as a
REIT would terminate automatically. See "Federal Income Tax Considerations--
Taxation of IMH--Income Tests."

The REIT provisions of the Code require IMH to distribute to its
stockholders substantially all of its taxable income. As a result, such
provisions restrict the Company's ability to retain earnings and replenish the
capital committed to its business activities.

The Company's liquidity is also affected by its ability to access the debt
and equity capital markets. To the extent that the Company is unable to
regularly access such markets, the Company could be forced to sell assets at
unfavorable prices or discontinue various business activities in order to meet
its liquidity needs. As a result, any such inability to access the capital
markets could have a negative impact on the Company's earnings.

Substantially all of the assets of the Conduit Operations have been pledged
to secure the repayment of mortgage-backed securities issued in the
securitization process, reverse repurchase agreements or other borrowings. In
addition, substantially all of the mortgage loans that the Company has
acquired and will in the future acquire have been or will be pledged to secure
borrowings pending their securitization or sale or as a part of their long-
term financing. The cash flows received by the Company from its investments
that have not yet been distributed, pledged or used to acquire mortgage loans
or other investments may be the only unpledged assets available to unsecured
creditors and stockholders in the event of liquidation of the Company.

DEMAND FOR RESIDENTIAL MORTGAGE LOANS AND THE COMPANY'S NON-CONFORMING LOAN
PRODUCTS

The availability of mortgage loans meeting the Company's criteria is
dependent upon, among other things, the size and level of activity in the
residential real estate lending market and, in particular, the demand for non-
conforming mortgage loans. The size and level of activity in the residential
real estate lending market depend on various factors, including the level of
interest rates, regional and national economic conditions and inflation and
deflation in residential property values, as well as the general regulatory
and tax environment as it relates to mortgage lending. See "Business--
Regulation." To the extent the Company is unable to obtain sufficient mortgage
loans meeting its criteria, the Company's business will be adversely affected.

FNMA and FHLMC are not currently permitted to purchase mortgage loans with
original principal balances above $207,000. If this dollar limitation is
increased without a commensurate increase in home prices, the Company's
ability to maintain or increase its current acquisition levels could be
adversely affected as the size of the non-conforming mortgage loan market may
be reduced, and FNMA and FHLMC may be in a position to purchase a greater
percentage of the mortgage loans in the secondary market than they currently
acquire.

In general, lower interest rates prompt greater demand for mortgage loans,
because more individuals can afford to purchase residential properties, and
refinancing and second mortgage loan transactions increase. However, if low
interest rates are accompanied by a weak economy and high unemployment, demand
for housing and residential mortgage loans may decline. Conversely, higher
interest rates and lower levels of housing finance

and refinance activity may decrease mortgage loan purchase volume levels,
resulting in decreased economies of scale and higher costs per unit, reduced
fee income, smaller gains on the sale of non-conforming mortgage loans and
lower net income.

Although the Company seeks geographic diversification of the properties
underlying the Company's mortgage loans and mortgage-backed securities, it
does not set specific limitations on the aggregate percentage of its portfolio
composed of such properties located in any one area (whether by state, zip
code or other geographic measure). Concentration in any one area will increase
exposure of the Company's portfolio to the economic and natural hazard risks
associated with such area. At March 31, 1996, 76.5% of IMH's mortgage loans
held for investment were secured by properties in California. Certain parts of
California have experienced an economic downturn in recent years, particularly
in areas of high defense industry concentration, and have suffered the effects
of certain natural hazards such as earthquakes, fires and floods, as well as
riots.

LIMITED HISTORY OF OPERATIONS

The Company commenced operations on November 20, 1995. Prior to the date of
the Contribution Transaction, ICIFC was a division or subsidiary of ICII and
IWLG was a division of SPTL. Although the Company was profitable for the year
ended December 31, 1995 and for the three months ended March 31, 1996, and has
experienced substantial growth in mortgage loan originations and total
revenues, there can be no assurance that the Company will be profitable in the
future or that these rates of growth will be sustainable or indicative of
future results. Prior to the Company's initial public offering (the "Initial
Public Offering"), each of ICIFC and IWLG benefited from the financial,
administrative and other resources of ICII and SPTL, respectively.

Since the Company commenced operations in November 1995, its growth in
purchasing loans has been significant. In light of this growth, the historical
financial performance of the Company may be of limited relevance in predicting
future performance. Also, the loans purchased by the Company and included in
the Company's securitizations have been outstanding for a relatively short
period of time. Consequently, the delinquency and loss experience of the
Company's loans to date may not be indicative of future results. It is
unlikely that the Company will be able to maintain delinquency and loan loss
ratios at their present levels as the portfolio becomes more seasoned.

A reduction in the number of loans available for purchase or a lack of
demand for the Company's mortgage loan products could limit the Company's
ability to fully invest the net proceeds of this Offering in mortgage loans
and mortgage-backed securities in a timely manner after completion of this
Offering. Should such an event occur, the Company will likely not be able to
maintain the level of performance it has achieved since the Contribution
Transaction.

RECENT AND PLANNED EXPANSION; RELIANCE ON ICII'S ORIGINATION CAPABILITY

The Company's total revenues and net income have grown significantly since
the Company's inception, primarily due to increased mortgage purchasing, sales
and investing activities. The Company intends to continue to pursue a growth
strategy for the foreseeable future, and its future operating results will
depend largely upon its ability to expand its Long-Term Investment Operations,
its Conduit Operations and its Warehouse Lending Operations. Each of these
plans requires additional personnel and assets and there can be no assurance
that the Company will be able to successfully expand and operate its expanded
operations profitably. There can be no assurance that the Company will
anticipate and respond effectively to all of the changing demands that its
expanding operations will have on the Company's management, information and
operating systems, and the failure to adapt its systems could have a material
adverse effect on the Company's results of operations and financial condition.
There can be no assurance that the Company will successfully achieve its
planned expansion or, if achieved, that the expansion will result in
profitable operations.

A significant portion of the Company's mortgage loan acquisitions since its
inception have been from ICII or its affiliates. Of the $280.7 million and
$1.1 billion of mortgage loans acquired by the Company for the three months
ended March 31, 1996 and the year ended December 31, 1995, respectively,
$166.2 million and $508.6 million, respectively, were purchased from ICII or
its affiliates. Mortgage loan acquisitions from ICII for the three months
ended March 31, 1996 consisted of acquisitions of mortgage loans from
correspondents associated with ICII. ICII has announced that it is
substantially divesting itself of its mortgage loan business except for those
activities referred to in the Non-Compete Agreement as described in "Certain
Transactions." As a result, the Company expects that the level of originations
provided by ICII should substantially decrease over time. Unless and until the
Company is able to acquire mortgage loans from other sources, the Company's
operations may be materially adversely affected.

COMPETITION FOR MORTGAGE LOANS

In purchasing non-conforming mortgage loans and issuing securities backed by
such loans, the Company competes with established mortgage conduit programs,
investment banking firms, savings and loan associations, banks, thrift and
loan associations, finance companies, mortgage bankers, insurance companies,
other lenders and other entities purchasing mortgage assets. Continued
consolidation in the mortgage banking industry may also reduce the number of
current sellers to the Conduit Operations, thus reducing the Company's
potential customer base, resulting in the Company purchasing a larger
percentage of mortgage loans from a smaller number of sellers. Such changes
could negatively impact the Conduit Operations. See "--Demand for Residential
Mortgage Loans and the Company's Non-Conforming Loan Products," "Business--
Competition" and "Business Conduit Operations--Marketing and Production--
Mortgage Loans Acquired." Mortgage-backed securities issued through the
Conduit Operations face competition from other investment opportunities
available to prospective investors.

The Company faces competition in its Conduit Operations and Warehouse
Lending Operations from other financial institutions, including but not
limited to banks and investment banks. Many of the institutions with which the
Company competes in these operations have significantly greater financial
resources than the Company. Increased competition in the Conduit Operations
and Warehouse Lending Operations could adversely affect the Company's
profitability. See "Business--Competition."

The Company's operations may be affected by the activities of ICII and its
affiliates. As an end-investor in non-conforming mortgage loans, SPTL may
compete with the Company; this activity is not restricted by an agreement not
to compete executed by and among the Company, SPTL and ICII in connection with
the Contribution Transaction (the "Non-Compete Agreement"). Also, Southern
Pacific Funding Corporation is a subsidiary of ICII whose business is
primarily to act as a wholesale originator and a bulk purchaser of non-
conforming mortgage loans. These activities are not restricted by the Non-
Compete Agreement. In addition, after the expiration of the Non-Compete
Agreement, ICII or any 25% entity may compete with the Company's Long-Term
Investment Operations, the Conduit Operations and the Warehouse Lending
Operations. While the Company believes such activities will not have a
material adverse effect on the Company's operations, there can be no assurance
of this. See "--Relationship with ICII and its Affiliates; Conflicts of
Interest" and "Business--Competition."

EXPERIENCE OF THE MANAGER IN MANAGING A REIT

The Company is dependent for the selection, structuring and monitoring of
its assets and associated borrowings on the diligence and skill of its
officers and the officers and employees of the Manager which has limited
experience in managing a REIT. See "Imperial Credit Advisors, Inc." for
further descriptions of the business experience of key management personnel.

RELATIONSHIP WITH ICII AND ITS AFFILIATES; CONFLICTS OF INTEREST

The Company is subject to conflicts of interest arising from its
relationship with its manager, ICAI, and ICAI's affiliates. ICAI, through its
affiliation with ICII, has interests that may conflict with those of the
Company in fulfilling certain of its duties. In addition, certain of the
officers and Directors of ICII or its affiliates are also officers and
Directors of the Company, including H. Wayne Snavely and Joseph R. Tomkinson,
Chairman of the Board and Chief Executive Officer of IMH, respectively. See
"Imperial Credit Mortgage Holdings, Inc. Directors and Executive Officers" and
"Imperial Credit Advisors, Inc.--Directors and Executive Officers." The
Company also relies upon ICAI (which has entered into a subcontract with ICII
to provide certain management services to the Company as ICAI deems necessary)
for the oversight of day-to-day operations of its business. All other
operations of the Company are conducted through ICIFC and IWLG, which had
approximately 60 and three employees, respectively, as of March 31, 1996. No
assurance can be given that the Company's relationships with ICAI and its
affiliates will continue indefinitely. The failure or inability of ICAI to
provide the services required of it under the Management Agreement (or of ICII
to perform its obligations under its subcontract with ICAI) or any other
agreements or arrangements with the Company would have a material adverse
effect on the Company's business. In addition, as the holder of all of the
outstanding voting stock of ICIFC, ICII has the right to elect all directors
of ICIFC and the ability to control the outcome of all matters for which the
consent of the holders of the common stock of ICIFC is required.

The Company intends to provide up to a $100 million warehouse facility to
FMAC on terms to be negotiated in an arms-length transaction. ICII owns 67% of
FMAC. See "Business--Warehouse Lending Operations--FMAC."

It is the intention of the Company and ICII that any agreements and
transactions, taken as a whole, between the Company, on the one hand, and ICII
or its affiliates, on the other hand, are fair to both parties. To minimize or
avoid potential conflicts of interests, all three Unaffiliated Directors must
independently and by majority vote approve all such agreements and
transactions. However, there can be no assurance that each of such agreements
or transactions will be on terms at least as favorable to the Company as could
have been obtained from unaffiliated third parties. See "Imperial Credit
Mortgage Holdings, Inc.," "Imperial Credit Advisors, Inc.," "Relationships
with Affiliates" and "Certain Transactions."

Pursuant to the Non-Compete Agreement, except as set forth below, ICII and
any 25% entity may not compete with the Warehouse Lending Operations and may
not establish a network of third party correspondent loan originators or
another end-investor in non-conforming mortgage loans. ICII has also agreed
(1) that, in addition to any other remedy that may be available to the
Company, it will sell, at a price determined by an independent appraisal, all
of the outstanding shares of common stock of ICIFC to be retained by ICII
pursuant to the Contribution Transaction to any third party reasonably
acceptable to the Company in the event that ICII or any 25% entity establishes
a network of third party correspondent loan originators or other end-investors
in non-conforming loans during the term of the Non-Compete Agreement and (2)
that any sale by ICIFC of shares of its capital stock or any sale or transfer
by ICII of any shares of the common stock of ICIFC which ICII owns may only be
made to a party reasonably acceptable to the Company. Pursuant to the Non-
Compete Agreement, SPTL may continue to act as an end-investor in non-
conforming mortgage loans and Southern Pacific Funding Corporation, a
subsidiary of ICII, may continue its business, which is primarily to act as a
wholesale originator and bulk purchaser of non-conforming mortgage loans.
Pursuant to a right of first refusal agreement executed by and between ICIFC
and ICII in connection with the Contribution Transaction (the "Right of First
Refusal Agreement"), ICII has granted ICIFC a right of first refusal to
purchase all non-conforming mortgage loans that ICII or any 25% entity
originates or acquires and subsequently offers for sale and ICIFC has granted
ICII or any 25% entity designated by ICII a right of first refusal to purchase
all conforming mortgage loans that ICIFC acquires and subsequently offers for
sale.

CONSEQUENCES OF FAILURE TO MAINTAIN REIT STATUS; COMPANY SUBJECT TO TAX AS A
REGULAR CORPORATION

IMH currently operates and has operated in a manner intended to allow it to
qualify as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"). Although IMH believes that it will continue to

operate in such a manner, no assurance can be given that IMH will remain
qualified as a REIT. Qualification as a REIT involves the satisfaction of
numerous requirements (some on an annual and others on a quarterly basis)
established under highly technical and complex Code provisions for which there
are only limited judicial and administrative interpretations, and involve the
determination of various factual matters and circumstances not entirely within
the Company's control. For example, in order to qualify as a REIT, at least
95% of IMH's gross income (including the gross income of IWLG) in any year
must be derived from qualifying sources and IMH must pay distributions to
stockholders aggregating annually at least 95% of its (and IWLG's) taxable
income (calculated without regard to the dividends paid deduction and
excluding net capital gains). No assurance can be given that legislation, new
regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to qualification as a REIT.

Among the requirements for REIT qualification is that the value of any one
issuer's securities held by a REIT may not exceed the value of 5% of the
REIT's total assets on certain testing dates. See "Federal Income Tax
Considerations--Taxation of IMH--Requirements for Qualification." IMH believes
that the aggregate value of the securities of ICIFC held by IMH are less than
5% of the value of IMH's total assets.

If IMH were to fail to qualify as a REIT in any taxable year, IMH would be
subject to federal income tax (including any applicable alternative minimum
tax) on its (and IWLG's) taxable income at regular corporate rates and would
not be allowed a deduction in computing its taxable income for amounts
distributed to its stockholders. Moreover, unless entitled to relief under
certain statutory provisions, IMH also would be disqualified from treatment as
a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of IMH
available for investment or distribution to stockholders because of the
additional tax liability of IMH for the years involved. In addition,
distributions to stockholders would no longer be required to be made. See
"Federal Income Tax Considerations--Taxation of IMH--Requirements for
Qualification."

INVESTMENT COMPANY ACT RISK

The Company at all times intends to conduct its business so as not to become
regulated as an investment company under the Investment Company Act.
Accordingly, the Company does not expect to be subject to the restrictive
provisions of the Investment Company Act. The Investment Company Act exempts
entities that are "primarily engaged in the business of purchasing or
otherwise acquiring mortgages and other liens on and interests in real estate"
("Qualifying Interests"). Under the current interpretation of the staff of the
Commission, in order to qualify for this exemption, the Company must maintain
at least 55% of its assets directly in mortgage loans, qualifying pass-through
certificates and certain other Qualifying Interests in real estate. In
addition, unless certain mortgage securities represent all the certificates
issued with respect to an underlying pool of mortgages, such mortgage
securities may be treated as securities separate from the underlying mortgage
loans and, thus, may not qualify as Qualifying Interests for purposes of the
55% requirement. The Company's ownership of certain mortgage loans therefore
may be limited by the provisions of the Investment Company Act. In addition,
in meeting the 55% requirement under the Investment Company Act, the Company
intends to consider privately issued certificates issued with respect to an
underlying pool as to which the Company holds all issued certificates as
Qualifying Interests. If the Commission, or its staff, adopts a contrary
interpretation with respect to such securities, the Company could be required
to restructure its activities to the extent its holdings of such privately
issued certificates did not comply with the interpretation. Such a
restructuring could require the sale of a substantial amount of privately
issued certificates held by the Company at a time it would not otherwise do
so. Further, in order to insure that the Company at all times continues to
qualify for the above exemption from the Investment Company Act, the Company
may be required at times to adopt less efficient methods of financing certain
of its mortgage loans and investments in mortgage-backed securities than would
otherwise be the case and may be precluded from acquiring certain types of
such mortgage assets whose yield is somewhat higher than the yield on assets
that could be purchased in a manner consistent with the exemption. The net
effect of these factors will be to lower at times the Company's net interest
income, although the Company does not expect the effect to be material. If the
Company fails to qualify for exemption from registration as an investment
company, its ability to use leverage would be substantially reduced, and it
would be unable to conduct its business as described herein. Any such failure
to qualify for such exemption could have a material adverse effect on the
Company.

FUTURE REVISIONS IN POLICIES AND STRATEGIES AT THE DISCRETION OF THE BOARD OF
DIRECTORS

The Board of Directors, including a majority of the Unaffiliated Directors,
has established the investment policies and operating policies and strategies
set forth in this Prospectus as the investment policies and operating policies
and strategies of the Company. With respect to other matters, the Company may,
in the future, but currently has no present plans to, invest in the securities
of other REITs for the purpose of exercising control, offer securities in
exchange for property or offer to repurchase or otherwise reacquire its shares
or other securities. The Company does not currently intend to underwrite the
securities of other issuers. However, any of the policies, strategies and
activities referenced above or described in this Prospectus may be modified or
waived by the Board of Directors, subject in certain cases to approval by a
majority of the Unaffiliated Directors, without stockholder consent.

EFFECT OF FUTURE OFFERINGS ON MARKET PRICE OF COMMON STOCK

The Company in the future may increase its capital resources by making
additional private or public offerings of its Common Stock, securities
convertible into its Common Stock, preferred stock or debt securities. The
actual or perceived effect of such offerings, the timing of which cannot be
predicted, may be the dilution of the book value or earnings per share of the
Common Stock outstanding, which may result in the reduction of the market
price of the Common Stock. The Company has adopted the DRP pursuant to which
shares are issuable at the DRP Price, which is 97% of the current market
price, thereby resulting in dilution to the extent such shares are issued by
the Company.

SHARES ELIGIBLE FOR FUTURE SALE

Sale of substantial amounts of the Company's Common Stock in the public
market or the prospect of such sales could materially and adversely affect the
market price of the Common Stock. Of the 6,750,000 shares of Common Stock to
be outstanding after the Offering, 500,000 shares are restricted in nature and
are not saleable pursuant to Rule 144 or otherwise until November 1997 at the
earliest. The Company, ICII, SPTL and certain stockholders have agreed with
the Underwriters that, for a period of 120 days following the commencement of
this Offering, they will not sell, contract to sell or otherwise dispose of
any of such 500,000 shares or rights to acquire any shares of Common Stock
(other than pursuant to employee plans or the DRP) without the prior written
consent of PaineWebber Incorporated. See "Shares Eligible for Future Sale" and
"Underwriting." Additionally, there are outstanding stock options for
250,000 shares of Common Stock, which have been granted at a per share
exercise price of $11.25 per share, to executive officers and Directors of the
Company or of the Manager, none of which, except in the event of a change of
control of the Company, are exercisable until November 1998; stock options for
an additional 45,000 shares of Common Stock have been granted to Unaffiliated
Directors of the Company at a per share exercise price of $13.00, none of
which, except in the event of a change of control of the Company, are
exercisable until November 1996; and an additional 105,000 shares of Common
Stock are reserved for future issuance pursuant to the Company's Stock Option
Plan. The Company intends to register under the Securities Act shares reserved
for issuance pursuant to the DRP and the Stock Option Plan. See "Dividend
Reinvestment Plan" and "Imperial Credit Mortgage Holdings, Inc.--Stock
Options."

PREFERRED STOCK; RESTRICTIONS ON OWNERSHIP OF COMMON STOCK; ANTI-TAKEOVER RISK

The Company's Articles of Incorporation and the amendments thereto (the
"Charter") authorizes the Board of Directors to issue shares of Preferred
Stock designated in one or more classes or series. The Preferred Stock may be
issued from time to time with such designations, any rights and preferences as
shall be determined by the Board of Directors. Preferred Stock would be
available for possible future financing of, or acquisitions by, the Company
and for general corporate purposes without any legal requirement that further
stockholder authorization for issuance be obtained. The issuance of Preferred
Stock could have the effect of making an attempt to gain control of the
Company more difficult by means of a merger, tender offer, proxy contest or
otherwise. The Preferred Stock, if issued, may have a preference on dividend
payments which could affect the ability of the Company to make dividend
distributions to the common stockholders. As of the date hereof, no shares of
Preferred Stock have been issued. Certain provisions of the Charter may also
have the effect of delaying, deferring or preventing a change in control of
the Company. See "Certain Provisions of Maryland Law and of the Company's
Charter and Bylaws" and "Description of Capital Stock."

In order for IMH to maintain its qualification as a REIT, not more than 50%
in value of the outstanding shares of IMH's capital stock, including the
Common Stock, may be owned, actually or constructively, by or for five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year (other than the first year). Furthermore,
after the first taxable year for which a REIT election is made, IMH's shares
of capital stock, including the Common Stock, must be held by a minimum of 100
persons for at least 335 days of a 12-month year (or a proportionate part of a
short tax year). In order to protect IMH against the risk of losing REIT
status due to a concentration of ownership among its stockholders, the Charter
prohibits any person, other than ICII as to the 374,538 shares which it owns
(which excludes the 50,000 shares of Common Stock held by SPTL pursuant to the
Contribution Transaction, as to which ICII disclaims beneficial ownership),
from acquiring or holding, actually or constructively, shares of Common Stock
in excess of 9.5%, (in value or in number of shares, whichever is more
restrictive), of the aggregate of the outstanding shares of Common Stock (the
"Ownership Limit"). For this purpose, the term "ownership" is defined in
accordance with the REIT provisions of the Code, the constructive ownership
provisions of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code, and Rule 13d-3 promulgated by the Commission under the Exchange Act
and the term "person" is defined to include a "group," which is defined to
have the same meaning as that term has for purposes of Section 13(d)(3) of the
Exchange Act. Accordingly, shares of Common Stock owned or deemed to be owned
by a person who individually owns less than 9.5% of the shares outstanding may
nevertheless be in violation of the ownership limitations set forth in the
Charter. The Charter further prohibits (1) any person from actually or
constructively owning shares of Common Stock that would result in IMH being
"closely held" under Section 856(h) of the Code or otherwise cause IMH to fail
to qualify as a REIT, and (2) any person from transferring shares of Common
Stock if such transfer would result in shares of Common Stock being owned by
fewer than 100 persons. If any transfer of shares of Common Stock occurs
which, if effective, would result in any person actually or constructively
owning shares of Common Stock in excess or in violation of the above transfer
or ownership limitations, then that number of shares of Common Stock the
actual or constructive ownership of which otherwise would cause such person to
violate such limitations (rounded to the nearest whole shares) shall be
automatically transferred to a trustee (the "Trustee") as trustee of a trust
(the "Trust") for the exclusive benefit of one or more charitable
beneficiaries (the "Charitable Beneficiary"), and the intended transferee
shall not acquire any rights in such shares. Shares held by the Trustee shall
be issued and outstanding shares of Common Stock. The intended transferee
shall not benefit economically from ownership of any shares held in the Trust,
shall have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the shares held in the Trust. The Trustee shall
have all voting rights and rights to dividends or other distributions with
respect to shares held in the Trust, which rights shall be exercised for the
exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Company that shares of Common
Stock have been transferred to the Trustee shall be paid with respect to such
shares to the Trustee upon demand and any dividend or other distribution
authorized but unpaid shall be paid when due to the Trustee. Any dividends or
distributions so paid over to the Trustee shall be held in trust for the
Charitable Beneficiary. The Board of Directors of the Company may, in their
discretion, waive these requirements on owning shares in excess of the
Ownership Limit.

Within 20 days of receiving notice from the Company that shares of Common
Stock have been transferred to the Trust, the Trustee shall sell the shares
held in the Trust to a person, designated by the Trustee, whose ownership of
the shares will not violate the ownership limitations set forth in the
Charter. Upon such sale, the interest of the Charitable Beneficiary in the
shares sold shall terminate and the Trustee shall distribute the net proceeds
of the sale to the intended transferee and to the Charitable Beneficiary as
follows. The intended transferee shall receive the lesser of (1) the price
paid by the intended transferee for the shares or, if the intended transferee
did not give value for the shares in connection with the event causing the
shares to be held in the Trust (e.g., in the case of a gift, devise or other
such transaction), the Market Price (as defined below) of the shares on the
day of the event causing the shares to be held in the Trust and (2) the price
per share received by the Trustee from the sale or other disposition of the
shares held in the Trust. Any net sale proceeds in excess of the amount
payable to the intended transferee shall be immediately paid to the Charitable
Beneficiary. In addition, shares of Common Stock transferred to the Trustee
shall be deemed to have been offered for sale to the Company, or its designee,
at a price per share equal to the lesser of (1) the price per share in the
transaction that resulted in such transfer to the Trust (or in the case of a
devise or gift, the Market Price at the time of such devise or gift) and (2)
the Market Price on the date the Company, or its designee, accepts such offer.
The

Company shall have the right to accept such offer until the Trustee has sold
the shares held in the Trust. Upon such a sale to the Company, the interest of
the Charitable Beneficiary in the shares sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the intended transferee.

The term "Market Price" on any date shall mean, with respect to any class or
series of outstanding shares of the Company's stock, the Closing Price (as
defined below) for such shares on such date. The "Closing Price" on any date
shall mean the last sale price for such shares, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, for such shares, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NYSE or, if such shares are not listed or
admitted to trading on the NYSE, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which such shares are listed or
admitted to trading or, if such shares are not listed or admitted to trading
on any national securities exchange, the last quoted price, or, if not so
quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or, if such system is no longer in use, the
principal other automated quotation system that may then be in use or, if such
shares are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market
in such shares selected by the Board of Directors or, in the event that no
trading price is available for such shares, the fair market value of the
shares, as determined in good faith by the Board of Directors.

Every owner of more than 5% (or such lower percentage as required by the
Code or the Treasury Regulations promulgated thereunder) of all classes or
series of IMH's stock, including shares of Common Stock, within 30 days after
the end of each taxable year, is required to give written notice to IMH
stating the name and address of such owner, the number of shares of each class
and series of stock of IMH beneficially owned and a description of the manner
in which such shares are held. Each such owner shall provide to IMH such
additional information as IMH may request in order to determine the effect, if
any, of such beneficial ownership on IMH's status as a REIT and to ensure
compliance with the Ownership Limit.

Subject to certain limitations, the Board of Directors may increase or
decrease the Ownership Limit.

These provisions may inhibit market activity and the resulting opportunity
for the Company's stockholders to receive a premium for their shares that
might otherwise exist if any person were to attempt to assemble a block of
shares of the Company's Common Stock in excess of the number of shares
permitted under the Charter. Such provisions also may make the Company an
unsuitable investment vehicle for any person seeking to obtain ownership of
more than 9.5% of the outstanding shares of Common Stock.

In addition, certain provisions of the Maryland General Corporation Law
("MGCL") and of the Company's Charter and Bylaws may also have the effect of
delaying, deterring or preventing a change in control of the Company. See
"Certain Provisions of Maryland Law and of the Company's Charter and Bylaws."

THE COMPANY

IMH was incorporated in the State of Maryland on August 28, 1995. The
Company operates in a manner that permits IMH to elect to be taxed as a REIT
for federal income tax purposes. The Company generates income for distribution
to its stockholders primarily from the net interest income derived from its
investments classified as Qualified REIT Assets and from its Conduit
Operations and Warehouse Lending Operations. As a result of its REIT status,
IMH is permitted to deduct dividend distributions to stockholders in
calculating its taxable income, thereby effectively eliminating the "double
taxation" that generally results when a corporation earns income and
distributes that income to stockholders in the form of dividends. IMH and any
Qualified REIT Subsidiary, including IWLG, generally are not subject to
federal income tax to the extent that certain REIT qualifications are met.
ICIFC is not consolidated with IMH for accounting purposes because IMH does
not own any of ICIFC's voting common stock and IMH does not control ICIFC. All
taxable income of ICIFC is subject to federal and state income taxes, where
applicable. See "Federal Income Tax Considerations--Other Tax Consequences."

The principal executive offices of the Company are located at 20371 Irvine
Avenue, Santa Ana Heights, California 92707, telephone (714) 556-0122.

The Manager, ICAI, oversees the day-to-day operations of the Company,
subject to the supervision of the Company's Board of Directors. The Manager is
involved in three primary activities: (1) asset-liability management--the
analysis and oversight of the acquisition, financing and disposition of
Company assets; (2) capital management--primarily the oversight of the
Company's structuring, analysis, capital raising and investor relations
activities; and (3) operations management--primarily the oversight of IMH's
operating subsidiaries. The Manager has employed personnel who have
significant experience in mortgage finance and in the purchase and
administration of mortgage assets. See "Imperial Credit Advisors, Inc.--
Management Agreement."

USE OF PROCEEDS

The net proceeds of this Offering are estimated to be $39.4 million (or
$45.3 million if the Underwriters' over-allotment option is exercised in full)
assuming a public offering price of $15.75. It is expected that approximately
70% and 20% of such proceeds will be used to provide funding for the Company's
Long-Term Investment Operations and its Warehouse Lending Operations,
respectively. The balance of such proceeds will be used for working capital
and general corporate purposes. Pending these uses, the proceeds may be
invested temporarily to the extent consistent with the REIT provisions of the
Code.

The Company anticipates that it will fully invest the net proceeds of this
Offering in mortgage loans and mortgage-backed securities within 60 days after
completion of this Offering. The Company has not specifically identified any
mortgage loans and mortgage-backed securities in which to invest the proceeds
of this Offering.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is listed on the AMEX under the symbol IMH. The
following table sets forth for the periods indicated the high and low sale
prices for the Common Stock as reported by the AMEX.

HIGH LOW
------ ------

1995
Fourth Quarter (from November 20, 1995)........................... $13.25 $12.00
1996
First Quarter..................................................... $15.38 $12.88
Second Quarter (through May 29, 1996)............................. 16.25 14.75

On May 29, 1996, the last reported sale price of the Common Stock on the
AMEX was $15.75 per share. As of May 15, 1996, there were approximately 168
holders of record of the Company's Common Stock.

DIVIDEND POLICY AND DISTRIBUTIONS

To maintain its qualification as a REIT, IMH intends to make annual
distributions to stockholders of at least 95% of its taxable income (which may
not necessarily equal net income as calculated in accordance with GAAP),
dertermined without regard to the deduction for dividends paid and by
excluding any net capital gains. The Company declares regular quarterly
dividend distributions on or about the twenty-second day of the month
following said quarter. Any taxable income remaining after the distribution of
the regular quarterly dividends will be distributed annually in a special
dividend on or prior to the date of the first regular quarterly dividends
payment date of the following taxable year. The dividend policy is subject to
revision at the discretion of the Board of Directors. All distributions in
excess of those required for IMH to maintain REIT status will be made by the
Company at the discretion of the Board of Directors and will depend on the
taxable earnings of the Company, the financial condition of the Company and
such other factors as the Board of Directors deems relevant. The Board of
Directors has not established a minimum distribution level. The Company
declared its initial dividend of $0.08 per share on January 25, 1996 for the
Interim Period, a dividend of $0.39 per share on April 16, 1996 for the
quarter ended March 31, 1996, and a dividend of $0.45 per share on May 29,
1996 for the quarter ended June 30, 1996.

Distributions to stockholders will generally be taxable as ordinary income,
although a portion of such distributions may be designated by IMH as capital
gain or may constitute a tax-free return of capital. IMH will annually furnish
to each of its stockholders a statement setting forth distributions paid
during the preceding year and their characterization as ordinary income,
capital gains or return of capital. For a discussion of the federal income tax
treatment of distributions by IMH, see "Federal Income Tax Considerations."

DIVIDEND REINVESTMENT PLAN

The Company has adopted a dividend reinvestment plan for stockholders who
wish to reinvest their dividend distributions in additional shares of Common
Stock. Stockholders owning 100 or more shares of Common Stock are eligible to
participate in the DRP. Pursuant to the DRP, dividends paid with respect to
shares of the Company's Common Stock owned by participants in the DRP will be
automatically invested in additional shares of Common Stock on the dividend
payment date or not later than 15 days thereafter at the DRP Purchase Price,
which is 97% of the then current market price of the Common Stock. Boston
EquiServe, L.P., the Company's transfer agent, acts as the trustee and
administrator of the DRP (the "Agent"). All dividends and cash distributions
paid with respect to the Common Stock owned by participants in the DRP will be
paid directly to the Agent. Dividends not immediately reinvested on the
payment date will be held in a non-interest bearing account pending the
investment in the Common Stock not later than 15 days thereafter. If the
dividend paid to any stockholder is not sufficient to purchase a whole number
of shares of Common Stock, such stockholder will be credited with fractional
shares, computed to four decimal places. DRP participants will generally be
treated as having received a taxable cash distribution or a taxable stock
distribution, depending on whether the Common Stock purchased with the
reinvested dividends is purchased in the open market or directly from the
Company, respectively. See "Federal Income Tax Considerations--Taxation of
Taxable U.S. Stockholders Generally."

Shares of Common Stock will be acquired by the Agent in transactions on the
open market or purchased directly from the Company at the option of the
Company. All brokerage commissions and fees, if any, will be paid by
participants in the DRP from the amount of the dividend or distribution. No
brokerage commissions or discounts or fees will be paid to the Company with
respect to the purchase of Common Stock directly from the Company. To the
extent shares of Common Stock are not available for purchase, the Agent will
distribute the cash to participants in the DRP.

Stockholders are not automatically enrolled in the DRP. Each stockholder
desiring to participate must complete and deliver to the Agent an enrollment
form, which will be sent to each eligible stockholder following this Offering
and the registration under the Securities Act of the shares to be offered by
the Company pursuant to the DRP. Participation in the DRP will commence with
all dividends and distributions payable after receipt of a participant's
authorization, provided that the authorization must be received by the Agent
prior to the record

date for any dividends in order for any stockholder to be eligible for
reinvestment of such dividends. A participant may terminate participation in
the DRP at any time upon delivery of a written notice to that effect to the
Agent, provided that the termination notice must be received by the Agent at
least two business days prior to the record date for any dividends in order
for the termination to be effective with respect to such dividends. Upon
termination, the Agent will send to the participant certificates evidencing
the whole shares in the participant's account and a check for any fractional
shares based on the current market value of the Common Stock on the date of
termination.

Participants will be sent detailed statements showing the amount of dividend
or distribution received, the number and price of shares of the Common Stock
purchased for their accounts and the total number of shares held by the Agent
for their accounts. Tax information for each calendar year of the DRP will be
sent to participants by the Agent.

The DRP may be amended by the Board of Directors provided that notice of
such amendment is sent to participants not later than 10 days prior to the
effective date thereof. Any such amendment will be effective only with respect
to dividends or distributions paid subsequent to the delivery of such notice.
The Board of Directors may terminate the DRP for any reason by delivering
notice thereof to all participants.

The shares issuable by the Company pursuant to the DRP are not being
registered by means of the Registration Statement of which this Prospectus
forms a part. To the extent such shares are issued by the Company, such shares
will be registered under the Securities Act by means of a separate
registration statement.

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996 and as adjusted to give effect to the issuance of 2,500,000 shares of
Common Stock offered hereby at an assumed public offering price of $15.75 per
share and the application of the estimated net proceeds therefrom as described
under "Use of Proceeds."

MARCH 31, 1996
-------------------------
AS
ACTUAL ADJUSTED (1)(2)
-------- ---------------
(IN THOUSANDS)

Reverse repurchase agreements........................ $528,746 $528,746
Stockholders' equity:
Preferred Stock, $.01 par value
10,000,000 shares authorized; no shares issued and
outstanding actual, and as adjusted............... -- --
Common Stock, $.01 par value
50,000,000 shares authorized; 4,250,000 shares
issued and outstanding actual, 6,750,000 shares as
adjusted.......................................... 43 68
Additional paid-in capital......................... 44,971 81,405
Investment securities valuation allowance.......... (67) (67)
Retained earnings.................................. 1,669 1,669
-------- --------
Total stockholders' equity....................... 46,616 83,075
-------- --------
Total capitalization............................. $575,362 $611,821
======== ========

- --------
(1) After deducting estimated underwriting discounts and commissions and
estimated offering expenses of $750,000 payable by the Company, and
assuming no exercise of the Underwriters' over-allotment option to
purchase up to an additional 375,000 shares of Common Stock.
(2) Does not include 400,000 shares reserved for issuance pursuant to the
Company's Stock Option Plan, of which options to acquire 250,000 shares
are outstanding at a per share exercise price of $11.25 and options to
acquire 45,000 shares are outstanding at a per share exercise price of
$13.00. The Company intends to increase the number of shares reserved for
issuance under its Stock Option Plan by 400,000 shares, subject to
stockholder approval at its annual stockholders' meeting to be held in
July 1996. See "Imperial Credit Mortgage Holdings, Inc.--Stock Options."

SELECTED FINANCIAL DATA

The following selected consolidated statement of operations data for each of
the years in the three-year period ended December 31, 1995 and the
consolidated balance sheet data as of December 31, 1995 and 1994 were derived
from the Company's and ICIFC's financial statements audited by KPMG Peat
Marwick LLP ("KPMG"), independent auditors, whose reports with respect thereto
appear elsewhere herein. The selected consolidated statement of operations
data for the year ended December 31, 1992 and the selected consolidated
balance sheet data as of December 31, 1993 were derived from the combined
financial statements of the Company and ICIFC, audited by KPMG. The selected
consolidated balance sheet data as of December 31, 1992 was derived from the
unaudited financial statements of the Company and ICIFC. Such selected
financial data should be read in conjunction with those financial statements
and the notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" also included elsewhere herein.
The following selected financial data for the three month periods ended March
31, 1996 and 1995 were derived from the unaudited financial statements of the
Company and ICIFC and include adjustments, consisting only of normal recurring
adjustments, which management considers necessary for a fair presentation of
such financial information for those periods. Results for the three months
ended March 31, 1996 are not necessarily indicative of results for the year
ending December 31, 1996.

As discussed further in the notes to the Company's financial statements,
Pre-Contribution Transaction (as defined below), the Company's financial
statements were prepared based upon the historical operations of IWLG, as a
division of SPTL, and include the Company's equity interest in ICIFC, as a
division of ICII. Since IWLG's operations began late in December of 1991, the
selected financial data begins with 1992. ICIFC selected financial data also
begins with 1992. Prior to 1992, operations of ICIFC were not maintained
separate from the operations of ICII. Since the Company believes the
operations of ICIFC prior to 1992 are not material, 1990 and 1991 statement of
operations and balance sheet data are not presented. Mortgage loan origination
volume of ICIFC for the year ended December 31, 1991 was approximately $178
million, and ICIFC 's servicing portfolio totaled $528 million at December 31,
1991.

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
(IN THOUSANDS)

THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1995 1994 1993 1992
--------- ------------- ---- ------ ------

STATEMENT OF OPERATIONS DATA:
Revenues:
Interest income................. $ 13,010 $ 86 $2,851 $292 $ 767 $ 685
Equity in net income of ICI
Funding Corporation............ 542 404 1,489 532 4,192 1,254
Fee income...................... 172 30 244 83 320 205
--------- ------ ------ ---- ------ ------
13,724 520 4,584 907 5,279 2,144
--------- ------ ------ ---- ------ ------
Expenses:
Interest on borrowings from
reverse-repurchase agreements.. 9,009 -- 1,116 -- -- --
Interest on borrowings from
SPTL........................... -- 48 599 127 334 377
Provision for loan losses....... 2,415 104 488 95 -- --
Advisory fee.................... 426 -- 38 -- -- --
General and administrative
expense........................ 180 32 209 225 197 103
--------- ------ ------ ---- ------ ------
12,030 184 2,450 447 531 480
--------- ------ ------ ---- ------ ------
Income before income taxes....... 1,694 336 2,134 460 4,748 1,664
Income (taxes) benefit........... -- 28 (76) 30 (234) (172)
--------- ------ ------ ---- ------ ------
Net income...................... $ 1,694 $ 364 $2,058 $490 $4,514 $1,492
========= ====== ====== ==== ====== ======

AT DECEMBER 31,
AT MARCH 31, -------------------------------
1996 1995 1994 1993 1992
------------ -------- ------ ------- -------

BALANCE SHEET DATA:
Total assets...................... $582,180 $613,688 $9,365 $13,591 $10,287
Mortgage loans held for
investment....................... 311,461 -- -- -- --
Finance receivables, net.......... 196,066 582,921 3,024 8,135 9,022
Investment in ICI Funding
Corporation...................... 9,536 866 6,335 5,446 1,254
Borrowings from SPTL.............. -- -- 2,511 7,585 8,785
Borrowings on reverse-repurchase
agreements....................... 528,746 567,727 -- -- --
Total stockholders' equity........ 46,616 45,236 6,853 6,006 1,492

ICI FUNDING CORPORATION
(IN THOUSANDS, EXCEPT OPERATING DATA)

THREE MONTHS
ENDED MARCH
31, YEAR ENDED DECEMBER 31,
-------------- ---------------------------------
1996 1995 1995 1994 1993 1992
------- ----- ------- ------- ------- ------

INCOME STATEMENT DATA:
Revenues:
Interest income............ $11,119 $ -- $ 1,249 $ -- $ -- $ --
Gain on sale of loans...... 2,613 730 4,135 2,291 5,859 1,155
Loan servicing income...... 32 1,333 5,159 4,043 1,377 1,131
Gain on sale of servicing
rights.................... -- 369 370 4,188 5,332 2,135
------- ----- ------- ------- ------- ------
13,764 2,432 10,913 10,522 12,568 4,421
------- ----- ------- ------- ------- ------
Expenses:
Interest on borrowings..... 11,219 149 1,785 538 127 --
General and administrative
expense................... 1,200 1,132 3,663 6,333 4,507 1,988
Provision for loan losses.. 400 -- -- 655 175 249
Amortization of mortgage
servicing rights.......... 14 448 2,892 2,070 459 --
------- ----- ------- ------- ------- ------
12,833 1,729 8,340 9,596 5,268 2,237
------- ----- ------- ------- ------- ------
Income before income taxes.. 931 703 2,573 926 7,300 2,184
Income taxes................ (383) (295) (1,069) (389) (3,066) (917)
------- ----- ------- ------- ------- ------
Net income................ $ 548 $ 408 $ 1,504 $ 537 $ 4,234 $1,267
======= ===== ======= ======= ======= ======
OPERATING DATA (IN
MILLIONS):
Mortgage loan acquisitions
(volume)(1)................ $ 281 $ 117 $ 1,117 $ 1,709 $ 2,149 $ 929
Servicing portfolio......... 652 1,947 512 1,868 950 623

AT DECEMBER 31,
AT MARCH 31, --------------------------------
1996 1995 1994 1993 1992
------------ -------- ------- ------- -------

BALANCE SHEET DATA:
Total assets.................... $188,106 $552,631 $12,097 $10,158 $ 137
Mortgage loans held for sale.... 179,631 544,273 -- -- --
Mortgage servicing rights....... 2,657 -- 11,453 9,551 --
Borrowings (receivable) from
ICII........................... -- -- 5,698 4,657 (1,129)
Borrowings from IWLG............ 173,408 550,291 -- -- --
Total shareholders' equity...... 9,632 875 6,399 5,501 1,267

- --------

(1)Represents principal amounts of mortgage loans purchased, excluding premiums
and discounts.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

IMH's principal sources of net income are (1) net income from its Long-Term
Investment Operations, (2) dividends from the Conduit Operations, which are
fully subject to federal and state income taxes, and (3) net income from IWLG,
the Warehouse Lending Operations. The principal source of income from its
Long-Term Investment Operations is net interest income, which is the net
spread between interest earned on mortgage loans and securities held for
investment and the interest costs associated with the borrowings used to
finance such loans and securities. The principal sources of income from ICIFC
are gains recognized on the sale of mortgage loans and securities, net
interest income earned on loans purchased by ICIFC pending their
securitization or resale, servicing fees, commitment fees and processing fee
income. The principal sources of income from IWLG are the net spread between
interest earned on short-term lines of credit (warehouse loans) and the
interest costs associated with the borrowings used to finance such loans and
the fee income received from the borrowers in connection with such loans.

THE CONTRIBUTION TRANSACTION

On November 20, 1995, ICII contributed to ICIFC certain of the operating
assets and certain customer lists of ICII's mortgage conduit operations,
including all of ICII's mortgage conduit operations' commitments to purchase
mortgage loans subject to rate locks from correspondents (having a principal
balance of $44.3 million on November 20, 1995), in exchange for shares
representing 100% of the common stock and 100% of the non-voting preferred
stock of ICIFC. Simultaneously, on November 20, 1995, in exchange for 500,000
shares of Common Stock, (i) ICII contributed to IMH all of the outstanding
non-voting preferred stock of ICIFC, which represents 99% of the economic
interest in ICIFC, (ii) SPTL contributed to IMH certain of the operating
assets and certain customer lists of SPTL's warehouse lending division, and
(iii) ICII and SPTL executed a Non-Compete Agreement and a Right of First
Refusal Agreement, each having a term of two years from November 20, 1995. Of
the 500,000 shares of Common Stock issued by IMH pursuant to the Contribution
Transaction, 450,000 shares were issued to ICII and 50,000 shares were issued
to SPTL. All of the outstanding shares of common stock of ICIFC were retained
by ICII. Lastly, IMH contributed to IWLG all of the aforementioned operating
assets of SPTL's warehouse lending operations contributed to it in exchange
for shares representing 100% of the common stock of IWLG thereby forming it as
a wholly owned subsidiary. On November 20, 1995, the net tangible book value
of the assets contributed pursuant to the Contribution Transaction was
$525,000. ICII and SPTL retained all other assets and liabilities related to
contributed operations, which at November 20, 1995 consisted mostly of $11.7
million of MSRs, $22.4 million of finance receivables and $26.6 million in
advances made by ICII and SPTL to fund mortgage conduit loan acquisitions and
to fund finance receivables, respectively.

References to the Pre-Contribution Transaction period refer to the periods
prior to November 20, 1995. References to the Post-Contribution Transaction
period refer to periods after November 20, 1995. References to financial
information of IMH reflect the financial operations of IMH and its subsidiary
IWLG and IMH's equity interest in ICIFC Post-Contribution Transaction and the
pro forma financial data of IMH's equity interest in SPTL's warehouse lending
operations and ICII's mortgage conduit operations Pre-Contribution
Transaction. References to financial information of ICIFC reflect the
financial data of ICIFC Post-Contribution Transaction and the pro forma
financial information of ICII's mortgage conduit operation Pre-Contribution
Transaction.

As discussed further in the Notes to ICIFC's financial statements, the
results of operations of ICIFC, of which 99% of the economic interest is owned
by IMH, are included in the results of operations for IMH as "Equity in net
income of ICI Funding Corporation." For Pre-Contribution Transaction, the
financial statements included elsewhere herein reflect management's estimate
of the level of previous capital and the amounts of interest charges and
general and administrative expense and taxes that ICII's mortgage conduit
operations would have incurred had it operated as an entity separate from
ICII.

HISTORICAL TRENDS

ICIFC's mortgage loan acquisitions decreased from $1.7 billion in 1994 to
$1.1 billion in 1995, which included $508.6 million in mortgage loans acquired
from ICII and its affiliates Post-Contribution Transaction. Management
attributes this decrease in mortgage loan acquisitions to the overall decrease
in mortgage loan originations throughout the mortgage industry as a result of
increased interest rates during 1995. In addition, the decrease in mortgage
loan acquisitions resulted from ICIFC's refocus from the conforming to the
non-conforming mortgage loan market and increased competition in such non-
conforming market. ICIFC was also adversely affected by the increase in
interest rates during 1994, resulting in a 20% decline in mortgage
acquisitions in 1994 to $1.7 billion from $2.1 billion originated in 1993. The
aforementioned decline in mortgage acquisitions resulted in higher operating
costs as a percentage of acquisitions, despite ICIFC's efforts to reduce
excess production capacity through 1994 and 1995.

In an effort to increase profitability, ICIFC reduced operating expenses in
1994 and 1995, primarily through a reduction in personnel. At March 31, 1996,
ICIFC employed 60 employees, an increase of 43% from 42 employees at March 31,
1995. At December 31, 1995, ICIFC had 60 employees, a 13% decrease from 71
employees at December 31, 1994. At December 31, 1994, the conduit operations
of ICII employed 71 employees, a 57% decrease from 167 employees at December
31, 1993. ICIFC continues to assess its work force in order to properly match
its loan acquisition capacity to current market demands. In 1995, ICIFC also
emphasized the acquisition of higher margin non-conforming mortgage loan
products which provided a higher return than conforming mortgage loans.

During the three months ended March 31, 1996, ICIFC's mortgage loan
acquisitions increased 139% to $280.7 million as compared to $116.2 million
for the same period in 1995. Excluding the acquisition of mortgage loans from
ICII or its affiliated mortgage banking operations, ICIFC's mortgage loan
acquisitions declined 1% to $114.4 million in the first three months of 1996
as compared to $116.2 million for the same period in 1995. The increase in
mortgage loan acquisitions for the three months ended March 31, 1996 as
compared to the same period the previous year was primarily the result of the
Company's increased marketing and sales effort subsequent to the Initial
Public Offering and its acquisitions from ICII and the mortgage banking
operations affiliated with ICII. As ICII divests itself of its affiliated
mortgage banking operations, to the extent permitted by the Non-Compete
Agreement, ICIFC expects to continue to acquire loans from these newly-formed
mortgage banking entities. In conjunction with the increase in loan
acquisitions and ICIFC's divestiture from ICII, the Company has added
additional personnel to handle functions previously performed by ICII.

ACCOUNTING FOR SERVICING RIGHTS

When ICIFC purchases loans that include the associated servicing rights, the
allocated price paid for the servicing rights, net of amortization based on
assumed prepayment rates, is reflected on its financial statements as MSRs.

On May 12, 1995, the Financial Accounting Standards Board issued SFAS No.
122, "Accounting for Mortgage Servicing Rights," an amendment to SFAS No. 65.
ICIFC elected to adopt this standard retroactive to January 1, 1995. SFAS No.
122 prohibits retroactive application to years prior to 1995.

SFAS No. 122 requires that a portion of the cost of acquiring a mortgage
loan be allocated to the mortgage loan servicing rights based on its fair
value relative to the loan as a whole. To determine the fair value of the

servicing rights created, ICIFC uses a valuation model that calculates the
present value of future net servicing revenues to determine the fair value of
the servicing rights. In using this valuation method, ICIFC incorporates
assumptions that it believes market participants would use in estimating
future net servicing income which include estimates of the cost of servicing,
an inflation rate, ancillary income per loan, a prepayment rate, a default
rate and a market discount rate.

ICIFC determines servicing value impairment by disaggregating its mortgage
conduit operations' servicing portfolio into its predominant risk
characteristics. ICIFC determines those risk characteristics to be loan
program type and interest rate. These segments of the portfolio are then
evaluated, using market prices under comparable servicing sale contracts, when
available, or alternatively using the same model as was used to originally
determine the fair value at acquisition, using current assumptions at the end
of the quarter. The calculated value is then compared to the capitalized
recorded value of each loan type and interest rate segment to determine if a
valuation allowance is required. At March 31, 1996, ICIFC had capitalized $2.7
million of MSRs.

MSRs are subject to some degree of volatility in the event of unanticipated
prepayments or defaults. Prepayments in excess of those anticipated at the
time MSRs are recorded could result in a decline in the fair value of the MSRs
below their carrying value requiring a provision to increase the MSRs'
valuation allowance. The rate of prepayment of loans is affected by a variety
of economic and other factors, including prevailing interest rates and the
availability of alternative financing. The effect of those factors on loan
prepayment rates may vary depending on the particular type of loan. Estimates
of prepayment rates are made based on management's expectations of future
prepayment rates, which are based, in part, on the historical rate of
prepayment of ICIFC's loans, and other considerations. There can be no
assurance of the accuracy of management's prepayments estimates. If actual
prepayments with respect to loans serviced occur more quickly than were
projected at the time such loans were sold, the carrying value of the MSRs may
have to be reduced through a provision recorded to increase the MSR's
valuation allowance in the period the fair value declined below the MSRs'
carrying value. If actual prepayments with respect to loans occur more slowly
than estimated, the carrying value of MSRs would not increase, although total
income would exceed previously estimated amounts and the related valuation
allowances, if any, could be unnecessary.

COMMITMENTS AND CONTINGENCIES

As part of its marketing strategy, ICIFC establishes mortgage loan purchase
commitments ("Master Commitments") with sellers that, subject to certain
conditions, entitle the seller to sell to ICIFC and obligate ICIFC to purchase
a specified dollar amount of non-conforming mortgage loans over a period
generally ranging from six months to one year. As of March 31, 1996 and
December 31, 1995, ICIFC had outstanding short-term Master Commitments with 28
and 18 sellers, respectively, to purchase mortgage loans in the aggregate
principal amount of $595.0 million and $241.0 million, respectively, over
periods ranging from six months to one year, of which $93.1 and $35.7 million,
respectively, had been purchased or committed to be purchased pursuant to
rate-locks (as defined below). As of March 31, 1996 and December 31, 1995,
$220.0 million and none, respectively, of such outstanding short-term Master
Commitments were outstanding with affiliates. While none of ICIFC's Master
Commitment agreements as of November 20, 1995 were transferred to ICIFC
pursuant to the Contribution Transaction, ICIFC entered into similar Master
Commitments with its sellers subsequent to the Contribution Transaction.

Sellers that enter into Master Commitments with ICIFC sell mortgage loans to
ICIFC by executing individual, bulk or other rate-locks (each, a "rate-lock").
Each rate-lock, in conjunction with the related Master Commitment, specifies
the terms of the related sale, including the quantity and price of the
mortgage loans or the formula by which the price is determined, the rate-lock
type and the delivery requirements. The up-front fee paid by a seller to ICIFC
to obtain a Master Commitment on a mandatory delivery basis is often refunded
pro rata as the seller delivers loans pursuant to rate-locks.

RESULTS OF OPERATIONS; IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995

Net income for the three months ended March 31, 1996 increased to $1.7
million as compared to $364,000 for the same period in 1995. Net income per
share for the three months ended March 31, 1996 was $0.39.

Revenues for the three months ended March 31, 1996 increased to $13.7
million as compared to $520,000 for the same period in 1995, primarily as a
result of IWLG's increase in interest income from its finance receivables and,
to a lesser extent, IMH's investment securities available for sale and cash
and cash equivalents. Total finance receivables increased to $196.1 million at
March 31, 1996 as compared to $6.1 million at March 31, 1995 as a result of
IWLG providing warehouse facilities to ICIFC subsequent to the Initial Public
Offering. At March 31, 1996, ICIFC accounted for 88% of IWLG's total gross
finance receivables outstanding. In addition, IMH invested a portion of the
net proceeds of the Initial Public Offering in investment securities available
for sale held by the Long-Term Investment Operations which did not exist prior
to the Initial Public Offering. At March 31, 1996, IMH had total investment
securities available for sale and cash and cash equivalents of $50.3 million
as compared to none at March 31, 1995.

Expenses for the three months ended March 31, 1996 increased to $12.0
million as compared to $184,000 for the same period in 1995 primarily as a
result of (1) an increase in borrowings associated with the financing of
IWLG's finance receivables, (2) an increase in the provision for loan losses
and (3) the payment of fees associated with the Management Agreement. Interest
expense from reverse-repurchase borrowings or borrowing from SPTL increased to
$9.0 million for the three months ended March 31, 1996 as compared to $48,000
for the same period in 1995. The increase in interest expense was the result
of increased borrowings to finance the growth in IMH's earning assets as
discussed above. The provision for loan losses increased to $2.4 million for
the three months ended March 31, 1996 as compared to $104,000 for the same
period in 1995 as a result of establishing an allowance for credit losses
related to the $313.8 million of mortgage loans held for investment at March
31, 1996, a portion of which underlies a CMO offering which closed in April
1996. The provision in 1995 was the result of a write-off of a customer's
outstanding balance on a finance receivable. While IMH believes that it has
adequately provided for any future credit losses, the Company may have to add
to its loan loss allowance based upon actual loan loss experience or an
increase in the Company's mortgage loans held for investment. Management fees
under the Management Agreement were $426,000 for the three months ended March
31, 1996 compared to no such fees during 1995.

Finance receivables decreased to $196.1 million at March 31, 1996 from
$582.9 million at December 31, 1995 due to the sale of $314.9 million of
mortgage loans held for sale at ICIFC to IMH, where such loans were held for
investment. This transaction reduced ICIFC's borrowings from IWLG.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net income, including the equity interest in the net income of ICIFC,
increased 320% to $2.1 million in 1995 from $490,000 in 1994. The increase in
net income was primarily the result of the increase in the equity interest in
the net income of ICIFC, the increase in IWLG's finance receivables
outstanding during 1995, and to a lesser extent, the purchase of an investment
portfolio, Post-Contribution Transaction. Excluding the equity interest in the
net income of ICIFC, net income in 1995 was $569,000 as compared to a loss of
$42,000 in 1994. Net income per share for 1995 Post-Contribution Transaction
was $0.07.

Revenues in 1995 increased 405% to $4.6 million as compared to $907,000 in
1994. Of the $4.6 million in 1995 revenue, $1.6 million was attributable to
the Post-Contribution Transaction entity. Such revenues primarily consisted of
interest income earned on the finance receivables, investments available for
sale, equipment lease payments, processing fee income and the equity interest
in ICIFC. The increase in revenues was primarily due to three factors: (1)
increased interest income earned on investments available for sale and a
higher outstanding balance of IWLG's finance receivables, (2) increased
profitability in the Conduit Operations as a result of cost savings and a
focus on higher margin mortgage products and (3) increased fee income as a
result of an increased number of transactions with IWLG's warehouse borrowers.

Total interest income increased 874% to $2.9 million in 1995 as compared to
$293,000 in 1994. Interest income is primarily composed of interest earned on
IMH's investments and IWLG's outstanding finance receivables. The increase in
interest income was the result of the Company acquiring an investment
portfolio, Post-Contribution Transaction, and a substantial increase in the
average outstanding balance of IWLG's finance receivables. As a result of the
Initial Public Offering, the Company raised a net of $44.5 million of capital
to fund the Long-Term Investment Operations and to capitalize or fund the
Warehouse Lending Operations and Conduit Operations.

With the capital raised in the Initial Public Offering, the Company acquired
four mortgage-backed securities at a recorded value of $17.4 million with a
weighted average yield of 11.2% at December 31, 1995. The mortgage-backed
securities ratings from one or more rating agencies range from investment
grade ("BBB") to non-investment grade ("B") quality. The mortgage loans
underlying the mortgage-backed securities are adjustable rate loans indexed
either to LIBOR or to the 11th District Cost of Funds. The Company also
acquired from Imperial Business Credit, Inc., a subsidiary of ICII, a
subordinated interest in an equipment-lease receivable securitization with a
carrying value of $8.4 million at December 31, 1995. See "Certain
Transactions."

IWLG's average outstanding finance receivables increased 866% to $30.0
million for 1995 as compared to $3.1 million for 1994, which led to a
corresponding increase of 874% in interest income to $2.9 million in 1995 as
compared to $293,000 in 1994. IWLG's total finance receivable balances
outstanding at December 31, 1995 were $582.9 million, of which $550.3 million
represented balances outstanding from ICIFC. The increase in ICIFC's balances
were primarily the result of several bulk purchases from ICII and SPTL, in the
amount of $176.6 million and $332.0 million, respectively, of mortgage loans.
Pre-Contribution Transaction, ICIFC's mortgage loans held for sale and the
related income were retained on the books of ICII. Post-Contribution
Transaction, IWLG executed an agreement with ICIFC to provide warehouse lines
to fund the Conduit Operations. Lastly, equity in net income of ICI Funding
Corporation increased 180% to $1.5 million in 1995 as compared to $532,000 in
1994. The increase was due to factors as set forth in "--Results of
Operations; ICI Funding Corporation--Year Ended December 31, 1995 Compared to
Year Ended December 31, 1994."

Expenses increased to $2.4 million in 1995 as compared to $447,000 in 1994.
The increase in expenses was primarily the result of increased interest on
borrowings Post-Contribution Transaction and a provision for finance
receivables charged to operations Pre-Contribution Transaction in 1995. The
increased interest on borrowings was the result of an increase in borrowings
associated with the funding of IWLG's finance receivables and IMH's investment
portfolio. As discussed previously, IWLG's average outstanding finance
receivables increased primarily as a result of borrowings by ICIFC in December
1995. Although interest expense increased 1,255% to $1.7 million in 1995 from
$127,000 in 1994, the increase was mainly Post-Contribution Transaction. The
increase in provision for finance receivables was primarily the result of
management's decision in 1995 to write off the outstanding balance of a
delinquent warehouse line. Approximately $388,000 of the charge-offs
represents the net outstanding balance on that committed line. As part of the
Contribution Transaction, these assets were retained, net of the allowance, by
SPTL. The remaining provision represents a Post-Contribution Transaction
general provision for loan losses. Expenses, other than interest on borrowings
and provision for finance receivable increased 9.8% to $247,000 in 1995 as
compared to $225,000 in 1994. Personnel expenses decreased 36.7% to $91,000 in
1995 as compared to $143,000 in 1994. Personnel expenses declined in 1995
primarily as a result of staffing reductions made in late 1994 in the
Warehouse Lending Operations. The advisory fee, which became effective on
November 20, 1995, was $38,000 in 1995. There was no advisory fee in 1994. See
"Certain Transactions; Management and Sub-Servicing Agreements."

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Net income in 1994 totaled $490,000, compared to $4.5 million in 1993. The
year-to-year decrease resulted primarily from a decrease in the equity
interest in the net income of ICIFC.

Revenues, excluding the equity interest in the net income of ICI Funding
Corporation, for the year ended December 31, 1994 decreased 66% to $375,000 as
compared to $1.1 million for 1993. The Company's equity

interest in the net income of ICI Funding Corporation for the year ended
December 31, 1994 decreased to $532,000 from $4.2 million in 1993 due to those
factors set forth below in "--Results of Operations--ICI Funding Corporation--
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993." The
decrease in such revenues was the result of an industry-wide decline in
mortgage loan originations, a reduced number of transactions, and a reduction
in average outstanding balances and the number of committed lines of credit
outstanding.

Expenses for the year ended December 31, 1994 decreased 16% to $447,000 as
compared to $531,000 for 1993. Total expenses for 1994 include a $95,000
provision for loan losses related to a warehouse lending agreement which had
been canceled, as discussed above. Personnel expenses increased 30% to
$143,000 for the year ended December 31, 1994 as compared to $110,000 for
1993. The increase in personnel expenses was the result of additional
personnel hired to process the growth in finance receivable transactions in
1993. Staffing reductions were made late in 1994 and were not fully reflected
in 1994 personnel expense levels.

RESULTS OF OPERATIONS; ICI FUNDING CORPORATION

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995

Net income for ICIFC for the three months ended March 31, 1996 increased 34%
to $548,000 from $408,000 for the same period in 1995.

Revenues for the three months ended March 31, 1996 increased to $13.8
million as compared to $2.4 million for the same period in 1995, as a result
of an increase in interest income from ICIFC's mortgage loans held for sale,
and to a lesser extent, an increase in gain on sale of loans, offset by a
reduction in loan servicing income. The increase in interest income for the
three months ended March 31, 1996 was the result of ICIFC retaining more
mortgage loans held for sale during the period. During the three months ended
March 31, 1995, which was prior to the Contribution Transaction, all of
ICIFC's mortgage loans held for sale were retained on the books of ICII and
all income derived from these loans were retained by ICII.

Gain on sale of loans increased to $2.6 million for the three months ended
March 31, 1996 as compared to $730,000 for the same period in 1995 as the
result of a $175.8 million fixed rate non-conforming principal balance of
mortgage loan securitization and a $65.7 million whole loan sale for which
proceeds received were $67.5 million during the three months ended March 31,
1996. During the three months ended March 31, 1995, gain on sale of conforming
mortgage loans generated less income per loan than ICIFC earned on the sale of
its non-conforming loans during the first quarter of 1996. Loan servicing
income decreased to $32,000 for the three months ended March 31, 1996 as
compared to $1.3 million for the same period in 1995 as a result of ICII
retaining all mortgage servicing rights as part of the Contribution
Transaction. Servicing income for the three months ended March 31, 1996
relates to loan servicing rights generated only during the period subsequent
to November 20, 1995.

Expenses for the three months ended March 31, 1996 increased to $12.8
million as compared to $1.7 million for the same period in 1995 primarily as a
result of an increase in borrowings associated with the financing of ICIFC's
mortgage loans held for sale and, to a lesser extent, increases in the
provision for loan losses and in personnel expenses, offset by an overall
reduction in general and administrative expenses. As noted above, prior to the
Contribution Transaction, ICIFC had no mortgage loans held for sale.
Subsequent to the Contribution Transaction, ICIFC entered into a warehouse
arrangement with IWLG to provide mortgage loan financing during the ICIFC
process of accumulating loans for sale and securitization. As a result of this
facility, ICIFC incurred $11.2 million in interest expense to finance its
mortgage loan acquisitions during the three months ended March 31, 1996. The
increase in the provision for loan losses to $400,000 for the three months
ended March 31, 1996, compared with no such provision in 1995, was the result
of establishing an allowance for estimated losses related to the potential
repurchase of previously sold loans due to breaches of standard
representations and warranties. Personnel expenses increased 61% to $835,000
for the three months ended March 31, 1996 as compared to $518,000 for the same
period in 1995 primarily as a result of ICIFC entering into employment
agreements with senior management that became effective on November 20, 1995.
Prior to the Contribution Transaction, ICIFC was allocated an apportionment of
these individual salaries by ICII. However, ICII retained a substantial
portion of the costs associated with the senior management of the Company
prior to the Contribution Transaction.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net income for the year ended December 31, 1995 increased 180% to $1.5
million as compared to $537,000 for the same period in 1994. The increase is
primarily due to increased profitability on the sale of mortgage loans and
reduced personnel and operating expenses. Overall, profitability was lower in
1994 as a result of lower profits on the sale of servicing-retained fixed rate
loans and a decrease in the principal amount of mortgage loans sold servicing-
released. Gain on sale of loans consists primarily of gains recorded upon the
sale of mortgage loans, net of associated expenses, and to a lesser extent,
fees received for commitments to fund mortgage loans. Prior to the
Contribution Transaction, financial information presented herein does not
reflect the net interest income from the mortgage loans held for sale during
accumulation and subsequent sale or securitization as this income was retained
by ICII, which provided the funding for such loans. Post-Contribution
Transaction for 1995, ICIFC earned interest income on mortgage loans held for
sale.

Revenues in 1995 increased 3.7% to $10.9 million as compared to $10.5
million in 1994. While total revenues did not materially change from year to
year, mortgage loan acquisitions declined 35% to $1.1 billion in 1995 as
compared to $1.7 billion in 1994. Total revenues remained consistent in 1995
as compared to 1994 due to increased profitability on the sale of loans,
interest earned on the loans while being held for sale or securitization and
loan servicing income, partially offset by a reduction in the amount of
servicing sold and the related gain on the sale of servicing rights.

Gain on sale of loans increased 80% to $4.1 million in 1995 as compared to
$2.3 million in 1994. The increased profitability on the sale of loans for the
year ended December 31, 1995 was due to several factors. As interest rates
stabilized, the calculated values of ICIFC's acquired servicing rights
increased, resulting in an increased amount of servicing value capitalized,
with a corresponding increase in the profitability of loan sales.
Additionally, the overall interest rate environment in 1995 was less volatile
than in 1994, which did not expose ICIFC to the same degree of losses as the
operations experienced in 1994.

ICIFC sold a larger percentage of its acquired loans into mortgage-backed
securities in 1995 as compared to 1994. During 1995, ICIFC, Pre-Contribution
Transaction, sold its LIBOR-based adjustable and fixed rate mortgage loans
into REMIC securities that generated gains in excess of what could have been
earned on whole loan sales. There were no such securitization gains in 1994.
The securitization and sale of ICIFC's LIBOR-based adjustable and fixed rate
loans in 1995 resulted in the creation of excess servicing assets that were
purchased, at fair value concurrent with the sale, from ICIFC by ICII, thereby
reducing intercompany borrowings from ICII and any tax-related timing
differences. The securitization gains resulted in part from the allocation of
amounts calculated using the present value of the expected future revenue
using prepayment assumptions, and estimated losses at a market discount rate.
The securitization gains created tax liabilities at the time of sale based on
taxable income (the tax liability is not necessarily equal to the reported
gain) equal to the present value gains calculated as discussed above. This
securitization method requires cash to finance the related tax liability since
the income is received over the life of the loans and the tax is paid in the
current year. ICIFC generated no gain on sale of loans accrued during the
Post-Contribution Transaction period through December 31, 1995.

Loan servicing income in 1995 increased 28% to $5.2 million as compared to
$4.0 million in 1994, primarily due to an increase in the average balance of
mortgage loans serviced during 1995, as compared to 1994. However, as part of
the Contribution Transaction, ICII retained all the assets of ICIFC except for
certain assets as described in the Contribution Agreement. ICII retained all
the MSRs; therefore, future loan servicing income will be substantially less
than in past periods until ICIFC builds its own loan servicing portfolio.
ICIFC generated no servicing income during the Post-Contribution Transaction
period through December 31, 1995.

Gain on sale of servicing rights decreased 91% to $370,000 in 1995 as
compared to $4.2 million in 1994. The total principal balance of loans
underlying servicing sold was $76.3 million for 1995 as compared to $619.8
million for 1994. The decrease in profitability on the sale of servicing
rights was primarily the result of a higher percentage of the mortgage loans
serviced having capitalized MSRs for 1995 as compared to 1994. Historically,
the Company's incentive to sell mortgage servicing rights has been based on
cash flow and income purposes.

Gain on the sale of servicing rights consists of the total sales price of the
bulk sale of servicing rights, net of related MSRs. The decision to buy or
sell servicing rights is based upon management's assessment of the market for
servicing rights and ICIFC's current and future cash flow and income
objectives. ICIFC generated no gain on sale of servicing rights for the Post-
Contribution Transaction through December 31, 1995.

Total expenses decreased 13% in 1995 to $8.3 million as compared to $9.6
million in 1994. This decrease was primarily due to a decrease in personnel
and operational expenses. Expenses for 1995 decreased primarily as a result of
significant reductions in ICIFC's mortgage loan production and administrative
staff and related reductions in personnel and general and administrative
expenses, offset by $1.3 million of interest expenses on borrowings from IWLG.
Pre-Contribution Transaction, all net interest income was retained by ICII.
However, Post-Contribution Transaction, ICIFC financed its mortgage loan
acquisitions through IWLG and therefore earned and paid any interest income or
interest expense associated with these borrowings, respectively. Total
interest on borrowings from IWLG was $1.3 million or 16% of the total expenses
for 1995. Excluding this item, total expenses decreased 27% to $7.0 million in
1995 as compared to $9.6 million 1994. ICIFC reduced personnel expenses by 46%
to $1.6 million in 1995 as compared to $3.0 million in 1994. ICIFC attained
this reduction primarily by reducing staffing by 60% from December 31, 1994.
However, ICIFC continued to experience increased unit acquisition costs as a
result of lower loan acquisition volumes during the first half of 1995 until
staffing could be reduced to match current acquisitions. ICIFC expects that
personnel expenses should increase in 1996 as a percentage of revenue due to
amounts payable under the employment agreements that were in effect on the
date of the Initial Public Offering and the hiring of additional support
staff.

Amortization of MSRs increased to $2.9 million in 1995 as compared to $2.1
million in 1994. The increase was primarily due to an increase in the average
outstanding balance of the mortgage servicing portfolio.

Occupancy expense decreased 49% to $150,000 in 1995 as compared to $296,000
in 1994. The decrease in occupancy expense was primarily the result of the
reallocation of ICII's corporate personnel to occupy the unused space after
the downsizing of ICIFC's operations in 1994 and 1995. General and
administrative expenses, which include other general and administrative
expenses, professional services, telephone and other communications and data
processing, decreased 38% to $1.9 million in 1995 as compared to $3.1 million
in 1994. The decrease was the result of reduced loan acquisition volume and
reduced levels of ICIFC's personnel and related expenses. No provision for
loan losses was taken in 1995 compared to a $655,000 provision taken in 1994.
The provision in 1994 was the result of a default on an unsecured loan by one
of ICIFC's correspondents. Management does not intend to make unsecured loans
to its correspondents in the future.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Net income in 1994 decreased 87% to $537,000 as compared to $4.2 million in
1993. The decrease in profitability was due to an increase in all expense
categories except professional services, resulting from the expansion of
ICII's mortgage conduit operations in 1993. Revenues for the year ended
December 31, 1994 decreased 16% to $10.5 million as compared to $12.6 million
for 1993. Gain on sale of loans decreased 61% to $2.3 million in 1994 as
compared to $5.9 million in 1993. The decrease was primarily the result of a
lower profitability on the sale of fixed rate loans sold servicing retained
and a decrease in the principal amount of mortgage loans sold servicing
released during 1994. Loan servicing income in 1994 increased 194% to $4.0
million as compared to $1.4 million in 1993. The increase in loan servicing
income was primarily due to a substantially higher average balance of loans
serviced. The servicing portfolio increased 97% to $1.9 billion at December
31, 1994 from $950.3 million at December 31, 1993. During 1994 and 1993,
ICII's mortgage conduit operations sold MSRs relating to $619.8 million and
$701.4 million principal amount of loans, respectively, resulting in pre-tax
gains of $4.2 million and $5.3 million, respectively. As interest rates
increased and prepayment rates decreased in 1994, the market value of ICII's
mortgage conduit operations' servicing portfolio increased, resulting in
higher sales prices and greater gains on sale of servicing.

Expenses in 1994 increased 82% to $9.6 million from $5.3 million in 1993.
The increase in expenses was primarily due to increased levels of staffing
during the first half of 1994 as a result of the expansion of ICII's mortgage
conduit operations' activities in 1993. Personnel expenses increased 17% to
$3.0 million in 1994 as compared to $2.5 million in 1993. Amortization of MSRs
increased 351% to $2.1 million in 1994 as compared to $459,000 in 1993. The
increase was primarily due to a substantially higher average outstanding
balance of capitalized MSRs and an increase in amortization as a result of
mortgage loan prepayments. Amortization due to prepayments of mortgage loans
increased to $313,000 in 1994 as compared to $183,000 in 1993. Occupancy
expense increased 53% to $296,000 in 1994 as compared to $193,000 in 1993. The
increase reflects the costs associated with the expansion of ICII's mortgage
conduit operations' office late in 1993. General and administrative expenses
including other general and administrative expenses, professional services,
telephone and other communications and data processing, increased 72% to $3.1
million in 1994 as compared to $1.8 million in 1993. The increase was the
result of expenses associated with the expansion of the mortgage conduit
operations and installation of new data processing systems. During the latter
part of 1994, as interest rates increased, ICII's mortgage conduit operations
implemented cost containment and revenue enhancement programs to offset the
pressures of reduced loan acquisitions on earnings. In order to control costs,
the staffing was reduced by 57% at December 31, 1994 as compared to the level
at December 31, 1993. The provision for loan losses increased to $655,000 in
1994 as compared to $175,000 in 1993. The increase in the provision in 1994
was the result of a write down of an unsecured loan made to one of ICII's
mortgage conduit operations' correspondents as mentioned above.

The Financial Accounting Standards Board issued Statement No. 109,
"Accounting for Income Taxes" ("SFAS 109"), which was effective for fiscal
years beginning December 15, 1992 was adopted by ICII's mortgage conduit
operations on January 1, 1993 on a prospective basis. Implementation of SFAS
109 had no material impact on ICII's mortgage conduit operations' financial
position or results of operations for the year ended December 31, 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal liquidity requirements result from the need to fund
the acquisition of mortgage loans held for sale by ICIFC, the long-term
investment in mortgage loans by IMH, and short-term loans by IWLG. Pre-
Contribution Transaction, ICIFC was funded by ICII through committed reverse
repurchase agreements and capital contributions. Historically, SPTL's
warehouse lending operations was funded by SPTL through deposits, other
borrowings and equity. However, Post-Contribution Transaction, the Long-Term
Investment Operations, the Conduit Operations and the Warehouse Lending
Operations are funded by reverse repurchase agreements, the sale of mortgage
securities and the issuance of CMOs and the proceeds from the issuance of
common stock.

During the three months ended March 31, 1996 and 1995 and the years ended
December 31, 1995, 1994 and 1993, net cash provided by (used in) operating
activities was $4.5 million, $62,000, $(72,000), $58,000, and $313,000,
respectively. Net cash for the three months ended March 31, 1995 and for
fiscal 1995, 1994 and 1993 was negatively affected by lower net income from
reduced demand for SPTL's warehouse lending facilities resulting from adverse
market conditions in the mortgage banking industry. Net cash for 1993 was
positively affected by improved market conditions in the mortgage banking
industry. For the three months ended March 31, 1996, cash provided by
operating activities was positively affected by an increase in payables as
compared to payables outstanding as of December 31, 1995.

Net cash provided by (used in) investing activities for the three months
ended March 31, 1996 and 1995 and the years ended December 31, 1995, 1994 and
1993 was $49.6 million, $(3.2) million, $(629.1) million, $5.0 million, and
$887,000, respectively. For the three months ended March 31, 1996 and 1995 and
in fiscal 1995, fundings of finance receivables exceeded prepayment rates of
such receivables primarily due to higher finance receivables from greater
mortgage loan acquisition volumes Post-Contribution Transaction. For 1994 and
1993, net cash was negatively affected by higher repayments of finance
receivables than mortgage loans funded.

For the three months ended March 31, 1996 and 1995 and the year ended
December 31, 1995, 1994 and 1993, net cash provided by (used in) financing
activities was $(39.3) million, $3.1 million, $631.5 million, $(5.1) million
and $(1.2) million, respectively. These net cash figures were affected by the
Company increasing investment in finance receivables and mortgage loan
acquisitions, thereby requiring it to raise additional cash to finance such
receivables and acquisitions. As a result of such factors, borrowings to fund
mortgage loan acquisitions fluctuated accordingly. Post-Contribution
Transaction, such borrowings consisted of reverse repurchase agreements. Pre-
Contribution Transaction such borrowings consisted of borrowings from SPTL.

At March 31, 1996 the Company had reverse repurchase facilities to provide
up to $631.6 million to finance the Company's three businesses. Terms of the
reverse repurchase agreements require that the mortgages be held by an
independent third party custodian, which gives the Company the ability to
borrow against the collateral as a percentage of the outstanding principal
balance. The borrowing rates quoted vary from 65 basis points to 100 basis
points over one-month LIBOR, depending on the type of collateral provided by
the Company. The margins on the reverse repurchase agreements are based on the
type of mortgage collateral used and generally range from 90% to 98% of the
fair market value of the collateral.

By December 31, 1995, the Company utilized approximately 65%, 20% and 10% of
the net proceeds from its Initial Public Offering to provide funding for the
Warehouse Lending Operations, Long-Term Investment Operations and its Conduit
Operations, respectively. Management believes that cash flow from operations
and the aforementioned potential financing arrangements is sufficient to meet
the current liquidity needs of the three businesses.

INFLATION

The Financial Statements and Notes thereto presented herein have been
prepared in accordance with GAAP, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time
due to inflation. The impact of inflation is reflected in the increased costs
of the Company's operations. Unlike industrial companies, nearly all of the
assets and liabilities of the Company's operations are monetary in nature. As
a result, interest rates have a greater impact on the Company's operations'
performance than do the effects of general levels of inflation. Inflation
affects the Company's operations primarily through its effect on interest
rates, since interest rates normally increase during periods of high inflation
and decrease during periods of low inflation. During periods of increasing
interest rates, demand for mortgage loans and a borrower's ability to qualify
for mortgage financing in a purchase transaction may be adversely affected.

BUSINESS

The following Business section contains forward-looking statements that
inherently involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including those set forth under "Risk Factors"
and elsewhere in this Prospectus.

GENERAL

IMH is a recently-formed specialty finance company, which operates three
businesses: (1) the Long-Term Investment Operations, (2) the Conduit
Operations and (3) the Warehouse Lending Operations. The Long-Term Investment
Operations is a recently-created business that invests primarily in non-
conforming residential mortgage loans and securities backed by such loans. The
Conduit Operations primarily purchases and sells or securitizes non-conforming
mortgage loans, and the Warehouse Lending Operations, provides short-term
lines of credit to originators of mortgage loans. The latter two businesses
include certain ongoing operations contributed to the Company by ICII on
November 20, 1995, a leading specialty finance company. IMH is organized as a
REIT for tax purposes, which allows it generally to pass through earnings to
stockholders without federal income tax at the corporate level.

Long-Term Investment Operations. The Long-Term Investment Operations,
conducted by IMH, invests primarily in non-conforming residential mortgage
loans and mortgage-backed securities secured by or representing interests in
such loans and, to a lesser extent, in second mortgage loans. Non-conforming
residential mortgage loans are residential mortgages that do not qualify for
purchase by government-sponsored agencies such as FNMA and FHLMC. Such loans
generally provide higher yields than conforming loans. The principal
differences between conforming loans and non-conforming loans include the
applicable loan-to-value ratios, the credit and income histories of the
mortgagors, the documentation required for approval of the mortgagors, the
type of properties securing the mortgage loans, the loan sizes and the
mortgagors' occupancy status with respect to the mortgaged properties. Second
mortgage loans are higher yielding mortgage loans made to borrowers owning
single-family homes, for the purpose of debt consolidation, home improvements,
education and a variety of other purposes. At March 31, 1996 the Company's
investment portfolio consisted of $311.5 million of non-conforming mortgage
loans and $33.2 million of mortgage-backed or other collateralized securities.

Conduit Operations. The Conduit Operations, conducted by ICIFC, purchases
primarily non-conforming mortgage loans and, to a lesser extent, second
mortgage loans from its network of third party correspondents and subsequently
securitizes or sells such loans to permanent investors, including the Long-
Term Investment Operations. ICIFC's ability to design non-conforming mortgage
loans, which suit the needs of its correspondent loan originators and their
borrowers while providing sufficient credit quality to investors, as well as
its efficient loan purchasing process, flexible purchase commitment options
and competitive pricing, enables it to compete effectively with other non-
conforming mortgage loan conduits. In addition to ongoing securitizations and
sales to third party investors, ICIFC supports the Long-Term Investment
Operations of the Company by supplying IMH with non-conforming mortgage loans
and securities backed by such loans at costs which are lower than would be
available through third parties. For the three months ended March 31, 1996,
ICIFC acquired $280.7 million in mortgage loans and sold $314.9 million of
mortgage loans to the Long-Term Investment Operations. During the years ended
December 31, 1995 and 1994, ICIFC acquired mortgage loans from its
correspondents, including ICII after the Contribution Transaction, in the
amount of $1.1 billion and $1.7 billion, respectively. Prior to the
Contribution Transaction, ICIFC was a division or subsidiary of ICII since
1990. IMH owns all of the outstanding preferred stock of ICIFC, representing
99% of the economic interest in ICIFC while ICII is the holder of all of the
outstanding voting stock of ICIFC, which represents the remaining 1% of the
economic interest in ICIFC.

approved investors. At March 31, 1996, the Warehouse Lending Operations had
$196.1 million in net finance receivables outstanding, of which $173.4 million
was outstanding with ICIFC.

LONG-TERM INVESTMENT OPERATIONS

GENERAL

IMH acquires mortgage loans and mortgage-backed securities, principally non-
conforming residential mortgage loans and securities backed by such loans, for
long-term investment. The Long-Term Investment Operations also invests, to a
lesser extent, in second mortgage loans. Currently, the Long-Term Investment
Operations include certain other assets which were purchased from ICII and its
affiliates, including FMAC. See "Certain Transactions--Other Transactions."
Income is earned principally from the net interest income received by the
Company on the mortgage loans and mortgage-backed securities acquired and held
in its portfolio. Such acquisitions are financed with a portion of the
Company's capital, as well as borrowings provided through reverse repurchase
agreements and CMO financings. On March 31, 1996 and December 31, 1995, the
Company had total outstanding borrowings under reverse repurchase agreements
of $528.7 million and $567.7 million, respectively. In April 1996, the Company
completed a $296.3 million CMO financing. ICIFC supports the investment
objectives of IMH by supplying all mortgage loans and mortgage-backed
securities to IMH at costs which the Company believes are lower than those
available through investment bankers and other third parties.

The following table sets forth the portfolio composition of the Long-Term
Investment Operations on the dates indicated.

AT MARCH 31, 1996 AT DECEMBER 31, 1995
----------------------------------- -----------------------------------
CARRYING WEIGHTED PERCENTAGE CARRYING WEIGHTED PERCENTAGE
VALUE AVERAGE YIELD OF PORTFOLIO VALUE AVERAGE YIELD OF PORTFOLIO
-------- ------------- ------------ -------- ------------- ------------
(DOLLARS IN THOUSANDS)
ASSET TYPE (1)

Money Market Account.... $14,105 5.28% 2.50% $ 750 5.73% 0.12%
Investment Securities
Available for Sale (2). 33,243 12.64 5.88 17,378 11.23 2.85
Mortgage Loans Held for
Investment:
Adjustable Rate Loans-
First Lien Mortgages.. 277,854 8.14 49.16 -- -- --
Fixed Rate Loans-Second
Mortgage Loans........ 35,897 13.19 6.35 -- -- --
-------- ------ -------- ------
313,751 8.72 55.51 -- -- --
-------- ------ -------- ------
Finance Receivables..... 196,291 8.34 34.73 583,021 8.80 95.64
Lease Payment
Receivables Held for
Sale................... 7,806 12.00 1.38 8,441 12.00 1.38
-------- ------ --------
Total Interest Bearing
Assets............... $565,196 8.78 100.00% $609,590 8.91 100.00%
-------- ====== -------- ======
BORROWING TYPE
Reverse Repurchase
Agreements............. $527,660 6.11 100.00% $566,652 6.67 100.00%
======== ----- ======== -----
Net Interest Spread... 2.67% 2.24%
===== =====

- -------

(1) At March 31, 1996 and December 31, 1995 the Company had $164,000 and none,
respectively, of non-performing mortgage loans attributable to Long-Term
Investment Operations.
(2) Represents securities purchased from ICII and an affiliate of ICII. See
"Certain Transactions--Other Transactions--Purchases of Other
Investments."

MORTGAGE LOANS HELD IN THE PORTFOLIO

The Company originates, through its network of correspondents, and invests a
substantial portion of its portfolio in non-conforming mortgage loans and, to
a lesser extent, second mortgage loans. The Company also purchases such loans
from third parties for long-term investment and for resale. Management
believes that there is a large demand for non-conforming mortgage loans and
that non-conforming mortgage loans provide an attractive net earnings profile
and produce higher yields without commensurately higher credit risks when
compared with conforming mortgage loans. A portion of the loans purchased
through the Conduit Operations as well as a portion of the investment
portfolio of the Long-Term Investment Operations are "B" and "C" grade
mortgage loans. The Company believes that a structural change in the mortgage
banking industry has occurred which has increased demand for higher yielding
non-conforming mortgage loans. This change has been caused by a number of
factors, including: (1) investors' demand for higher yielding assets due to
historically low interest rates over the past few years; (2) increased
securitization of high-yielding non-conforming mortgage loans by the
investment banking industry; (3) quantification and development of
standardized credit criteria by credit rating agencies for securities backed
by non-conforming mortgage loans; (4) increased competition in the
securitization industry, which has reduced borrower interest rates and fees,
thereby making non-conforming mortgage loans more affordable; and (5) the end
of the refinance "boom" of 1992 and 1993, which has caused many mortgage
banks, attempting to sustain origination volume, to seek out non-conforming
mortgage loan borrowers.

INVESTMENTS IN MORTGAGE-BACKED SECURITIES AND MASTER SERVICING FEES
RECEIVABLE

The Company also acquires mortgage-backed securities generated through its
own securitization efforts as well as those generated by third parties. In
connection with the issuance of mortgage-backed securities by the Company in
the form of REMICs, IMH may retain the senior or subordinated securities as
regular interests (not including residual interests) on a short-term or long-
term basis. In connection with its February 1996 $175.4 REMIC security, the
Company retained securities as regular interest in the amount of $8.5 million.
Any such retained regular interest may include "principal only" or "interest
only" securities or other interest rate or prepayment sensitive securities or
investments. Any such retained securities or investments may subject the
Company to credit, interest rate and/or prepayment risks. The Company
anticipates it will retain such securities only on terms which it believes are
sufficiently attractive to compensate it for assuming such associated risks.

The Company expects in the future to retain master servicing fees
receivable. See"--Servicing and Master Servicing." Master servicing fees
receivable have characteristics similar to interest only securities;
accordingly, they have many of the same risks inherent in interest only
securities, including the risk that they will lose a substantial portion of
their value as a result of rapid prepayments occasioned by declining interest
rates.

Master servicing fees receivable represent the present value of the
difference between the interest rate on mortgage loans purchased by the
Conduit Operations and the interest rate received by investors who purchase
the securities backed by such loans, in excess of the normal loan servicing
fees charged by either (1) the Conduit Operations on loans acquired "servicing
released" or (2) correspondents who sold loans to the Conduit Operations with
the "servicing retained" (the "Excess Servicing Fees"). At March 31, 1996 and
December 31, 1995, the Company had no master servicing fees receivable.

When the Conduit Operations purchases loans which include the associated
servicing rights, the allocated price paid for the servicing rights will be
reflected on its financial statements as MSRs. MSRs differ from master
servicing fees receivable primarily by the required amount of servicing to be
performed, the loss exposure to the owner of the instrument and the financial
liquidity of the instrument. In contrast to MSRs, where the owner of the
instrument acts as the servicer, master servicing fees receivable do not
require the owner of the instrument to service the underlying mortgage loan.
In addition, master servicing fees receivable subject their owners to greater
loss exposure from delinquencies or foreclosure on the underlying mortgage
loans than MSRs because a master servicer stands behind the servicer (or
subservicer) and potentially the owner of the mortgage loan in priority of
payment. Both MSRs and master servicing fees receivable are traded in the
public financial markets. However, MSRs are generally more liquid and are
traded at less of a discount as compared to master servicing fees receivable.
At March 31, 1996 and December 31, 1995, the Company had $2.7 million and
none, respectively, of MSRs.

To the extent that servicing fees on a mortgage loan exceed a "normal"
servicing fee (typically ranging from 0.25% to 0.375% per annum of the
mortgage loan principal amount), the Conduit Operations will generate master
servicing fees receivable as an asset that represents an estimated present
value of those excess fees assuming a prepayment rate on the mortgage loan. In
determining present value of future cash flows, the Conduit Operations will
use a market discount rate. Prepayment assumptions will be based on recent
evaluations of the actual prepayments of the Conduit Operations' servicing
portfolio or on market prepayment rates on new portfolios on which the Conduit
Operations has no experience and the interest rate environment at the time the
master servicing fees receivable are created. There can be no assurance of the
accuracy of management's prepayment estimates. If actual prepayments with
respect to sold mortgage loans occur more quickly than was projected at the
time such mortgage loans were sold, the carrying value of the master servicing
fees receivable may have to be written down through a charge to earnings in
the period of adjustment. If actual prepayments with respect to sold mortgage
loans occur more slowly than estimated, the carrying value of master servicing
fees receivable on the Company's statement of financial condition would not
increase, although total income would exceed previously estimated amounts.

Management of the Company believes that because of the current level of
interest rates, investments in current coupon master servicing fees receivable
are prudent, and if interest rates rise, these investments will mitigate
declines in income that may occur in the Conduit Operations. The Company
intends to hold the master servicing fees receivable for investment. Currently
there is a limited liquid secondary market for master servicing fees
receivable; accordingly, if the Company had to sell these receivables, the
value received may or may not be at or above the values at which the Company
carried them on its balance sheet.

The Company has purchased and retained subordinated securities, with ratings
ranging from "B" to "BBB", collaterized by adjustable rate mortgages. The
subordinated securities are primarily backed by 30-year amortizing mortgage
loans that adjust monthly, semi-annually or annually based on the 6-month
LIBOR and 11th District Cost of Funds rates. In general, subordinated classes
of a particular series of securities bear all losses prior to the related
senior classes. Losses in excess of expected losses at the time such
securities are purchased would adversely affect the Company's yield on such
securities and, in extreme circumstances, could result in the failure of the
Company to recoup its initial investment.

The Company will not acquire REMIC or CMO residuals, excluding residual
interests for which the Company owns all of the outstanding interests in the
REMIC or the CMO or which result from a securitization transaction by the
Conduit Operations. See "--Conduit Operations--Securitization and Sale
Process."

FINANCING

Mortgage loans and securities backed by mortgage loans are financed
primarily at short-term borrowing rates through reverse repurchase agreements
and other financings which the Company may establish with approved
institutional lenders. Reverse repurchase agreements are the principal
financing devices utilized by the Company to leverage its mortgage loan
portfolio. Upon repayment of each borrowing in the form of a reverse
repurchase agreement, the collateral is immediately used for borrowing in the
form of a new reverse repurchase agreement. The Company obtained financings in
amounts and at interest rates that are consistent with its financing
objectives described herein with five different third-party lenders and
expects to increase the number of lenders in the future. For a discussion of
the terms of the Company's reverse repurchase facilities, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources." The Company is seeking to establish
commitment agreements under which certain of its lenders would be required to
enter into new reverse repurchase agreements as needed by the Company during a
specified period of time.

A reverse repurchase agreement, although structured as a sale and repurchase
obligation, acts as a financing under which the Company effectively pledges
its mortgage loans and mortgage securities as collateral to secure a short-
term loan. Generally, the other party to the agreement makes the loan in an
amount equal to a percentage of the market value of the pledged collateral. At
the maturity of the reverse repurchase agreement, the Company is required to
repay the loan and correspondingly receives back its collateral. Under reverse
repurchase agreements, the Company generally retains the incidents of
beneficial ownership, including the right to distributions on the collateral
and the right to vote on matters as to which certificate holders vote. Upon a
payment default under such agreements, the lending party may liquidate the
collateral.

The Company's borrowing agreements require the Company to pledge cash or
additional securities backed by mortgage loans in the event the market value
of existing collateral declines. To the extent that cash reserves are
insufficient to cover such deficiencies in collateral, the Company may be
required to sell assets to reduce its borrowings.

Reverse repurchase agreements take the form of a sale of securities to the
lender at a discounted price in return for the lender's agreement to resell
the same securities to the borrower at a future date (the maturity of the
borrowing) at an agreed price. In the event of the insolvency or bankruptcy of
the Company, certain reverse repurchase agreements may qualify for special
treatment under the Bankruptcy Code, the effect of which is, among other
things, to allow the creditor under such agreements to avoid the automatic
stay provisions of the Bankruptcy Code and to foreclose on the collateral
agreements without delay. In the event of the insolvency or bankruptcy of a
lender during the term of a reverse repurchase agreement, the lender may be
permitted, under the Bankruptcy Code, to repudiate the contract, and the
Company's claim against the lender for damages therefrom may be treated simply
as one of the unsecured creditors. In addition, if the lender is a broker or
dealer subject to the Securities Investor Protection Act of 1970, the
Company's ability to exercise its rights to recover its securities under a
reverse repurchase agreement or to be compensated for any damages resulting
from the lender's insolvency may be further limited by such statute. If the
lender is an insured depository institution subject to the Federal Deposit
Insurance Act, the Company's ability to exercise its rights to recover its
securities under a reverse repurchase agreement or to be compensated for
damages resulting form the lender's insolvency may be limited by such statute
rather than the Bankruptcy Code. The effect of these various statutes is,
among other things, that a bankrupt lender, or its conservator or receiver,
may be permitted to repudiate or disaffirm its reverse repurchase agreements,
and the Company's claims against the bankrupt lender for damages resulting
therefrom may be treated simply as one of an unsecured creditor. Should this
occur, the Company's claims would be subject to significant delay and, if and
when received, may be substantially less than the damages actually suffered by
the Company.

To reduce its exposure to the credit risk of reverse repurchase agreement
lenders, the Company entered into such agreements with several different
parties and follows its own credit exposure procedures. The Company monitors
the financial condition of its reverse repurchase agreement lenders on a
regular basis, including the percentage of mortgage loans that are the subject
of reverse repurchase agreements with a single lender. Notwithstanding these
measures, no assurance can be given that the Company will be able to avoid
such third party risks.

ISSUANCE OF MORTGAGE-BACKED SECURITIES

Collateralized Mortgage Obligations. In addition to the financing strategies
set forth above, as mortgage loans are accumulated, the Company issues CMOs
secured by such loans as a means of financing its Long-Term Investments
Operations. The decision to issue CMOs is based on the Company's current and
future investment needs, market conditions and other factors. For accounting
and tax purposes, the mortgage loans financed through the issuance of CMOs are
treated as assets of the Company, and the CMOs are treated as debt of the
Company. Each issue of CMOs is fully payable from the principal and interest
payments on the underlying mortgage loans collateralizing such debt, any cash
or other collateral required to be pledged as a condition to receiving the
desired rating on the debt, and any investment income on such collateral. The
Long-Term Investment Operations earns the net interest spread between the
interest income on the mortgage loans and the interest and other expenses
associated with the CMO financing. The net interest spread may be directly
impacted by the levels of prepayment of the underlying mortgage loans and to
the extent CMO classes have variable rates of interest, may be affected by
changes in short-term interest rates.

When the Company issues CMOs for financing purposes, it seeks an investment
grade rating for such CMOs by a nationally-recognized rating agency. To secure
such a rating, it is often necessary to pledge collateral ("Additional
Collateral") in excess of the principal amount of the CMOs to be issued, or to
obtain other forms of credit enhancements such as additional mortgage loan
insurance. The need for Additional Collateral or other credit enhancements
depends upon factors such as the type of collateral provided and the interest
rates paid

thereon, the geographic concentration of the mortgaged property securing the
collateral and other criteria established by the rating agency. The pledge of
Additional Collateral reduces the capacity of the Company to raise additional
funds through short-term secured borrowings or additional CMOs and diminishes
the potential expansion of its investment portfolio. As a result, the
Company's objective is to pledge collateral for CMOs only in the amount
required to obtain an investment grade rating for the CMOs by a nationally-
recognized rating agency.

The Company believes that under prevailing market conditions, an issuance of
CMOs receiving other than an investment grade rating would require payment of
an excessive yield to attract investors. No assurance can be given that the
Company will achieve the ratings it plans to seek for the CMOs. As of March
31, 1996, the Company had not issued any CMOs for financing its Long-Term
Investment Operations. However, during the second quarter of 1996, the Company
completed a $296.3 million CMO financing. The CMO was structured as a one
month LIBOR "floater" with interest payable monthly at LIBOR plus 0.50%. The
CMO is guaranteed for the holders thereof by a mortgage loan insurer giving
the CMO the highest rating established by a nationally-recognized rating
agency. The underlying principal balance of the mortgages supporting the CMO
represent approximately $267.2 million of six month LIBOR adjustable rate
mortgage loans with varying grade quality and $34.4 million of second mortgage
loans.

Other Mortgage-Backed Securities. As an additional alternative for the
financing of its Long-Term Investment Operations, the Company may issue other
mortgage-backed securities, if, in the determination of ICIFC, the issuance of
such other securities is advantageous. In particular, mortgage pass-through
certificates representing an undivided interest in pools of mortgage loans
formed by the Company may prove to be an attractive vehicle for raising funds.

The holders of mortgage pass-through certificates receive their pro rata
share of the principal payments made on a pool of mortgage loans and interest
at a pass-through interest rate that is fixed at the time of offering. The
Company may retain up to a 100% undivided interest in a significant number of
the pools of mortgage loans underlying such pass-through certificates. The
retained interest, if any, may also be subordinated so that, in the event of a
loss, payments to certificate holders will be made before the Company receives
its payments. Unlike the issuance of CMOs, the issuance of mortgage pass-
through certificates will not create an obligation of the Company to security
holders in the event of a borrower default. However, as in the case of CMOs,
the Company may be required to obtain various forms of credit enhancements in
order to obtain an investment grade rating for issues of mortgage pass-through
certificates by a nationally-recognized rating agency. As of March 31, 1996,
IMH had not issued any such mortgage-backed securities.

CONDUIT OPERATIONS

GENERAL

ICIFC began its mortgage conduit operations as a division of ICII in 1990.
As of March 31, 1996, ICIFC maintained relationships with 223 correspondents.
Correspondents originate and close mortgage loans under ICIFC's mortgage loan
programs offered through the secondary market on a flow (loan by loan) basis
or acquire loans on a bulk acquisition commitment. Correspondents include
savings and loan associations, commercial banks, mortgage bankers and mortgage
brokers. During the three months ended March 31, 1996, the Interim Period, and
the years ended December 31, 1995 and 1994, ICIFC acquired from its
correspondents, including ICII after the Contribution Transaction, $280.7
million, $547.2 million, $1.1 billion and $1.7 billion, respectively, of
mortgage loans.

The Conduit Operations consists of the purchase and sale of mortgage loans
primarily secured by first liens and, to a lesser extent, second liens on
single (one-to-four) family residential properties that are originated in
accordance with ICIFC's underwriting guidelines. As a non-conforming mortgage
loan conduit, ICIFC acts as a intermediary between the originators of mortgage
loans that do not currently meet the guidelines for purchase by government-
sponsored entities (i.e., FNMA and FHLMC) that guarantee mortgage-backed
securities and permanent investors in mortgage-backed securities secured by or
representing an ownership interest in such mortgage loans. ICIFC also acts as
a bulk purchaser of primarily non-conforming mortgage loans. The Company
believes that non-conforming mortgage loans provide an attractive net earnings
profile, producing higher yields without commensurately higher credit risks
when compared to mortgage loans that qualify for purchase by FNMA or FHLMC. In
addition, based on the Company's experience in the mortgage banking industry
and in the mortgage conduit business, the Company believes it provides
mortgage loan sellers with an expanded and competitively priced array of non-
conforming and "B" and "C" grade mortgage loan products, timely purchasing of
loans, mandatory, best efforts and optional rate-lock commitments, and
flexible Master Commitments.

All non-conforming loans purchased by ICIFC are made available for sale to
IMH at the same price at which the loans were acquired by ICIFC or fair market
value at the date of sale and subsequent transfer to IMH. In addition, ICII
granted ICIFC a right of first refusal to purchase all non-conforming loans
that ICII or any 25% entity originates or acquires and subsequently offers for
sale, and ICIFC granted ICII, or any 25% entity designated by ICII, a right of
first refusal to purchase all conforming mortgage loans that ICIFC acquires
and subsequently offers for sale. See "Certain Transactions--The Contribution
Transaction."

MARKETING AND PRODUCTION

Marketing Strategy. The Company's competitive strategy is, in part, to be a
low cost national acquirer, through its national correspondent network, of
mortgage loans to be held for investment or sold in the secondary market as
whole loans or securitized as mortgage-backed securities. A key feature of
this approach is the use of a large national network of correspondent
originators, which enables the Company to shift the high fixed costs of
interfacing with the homeowner to the correspondents. The marketing strategy
for the Conduit Operations is designed to accomplish three objectives: (1)
attract a geographically diverse group of both large and small correspondent
loan originators, (2) establish relationships with such correspondents and
facilitate their ability to offer a variety of loan products designed by ICIFC
and (3) purchase the loans and securitize or sell them into the secondary
market or to IMH. In order to accomplish these objectives, ICIFC designs and
offers loan products that are attractive to potential non-conforming borrowers
as well as to end-investors in non-conforming mortgage loans and mortgage-
backed securities.

ICIFC has historically emphasized and continues to emphasize flexibility in
its mortgage loan product mix as part of its strategy to attract
correspondents and establish relationships. ICIFC also maintains relationships
with numerous end-investors so that it may develop products that they may be
interested in as market conditions change, which in turn may be offered
through the correspondent network. As a consequence, ICIFC is less

dependent on acquiring conforming mortgage loans than many mortgage bankers
and has, in the past, both as a division or subsidiary of ICII and as a
subsidiary of IMH, acquired significant volumes of non-conforming loans.

In response to the needs of its non-conforming mortgage loan correspondents
and as part of its strategy to facilitate the sale of its loans through the
Conduit Operations, ICIFC's marketing strategy offers efficient response time
in the purchase process, direct and frequent contact with Sellers through a
trained sales force and flexible commitment programs. Finally, due to the
price sensitivity of most home buyers, ICIFC is competitive in pricing its
products in order to attract sufficient numbers of borrowers.

Mortgage Loans Acquired. A majority of the mortgage loans purchased through
the Conduit Operations are non-conforming mortgage loans. Currently, the
maximum principal balance for a conforming loan is $207,000. Loans that exceed
such maximum principal balance are referred to as "jumbo loans." Non-
conforming mortgage loans generally consist of jumbo loans or other loans that
are originated in accordance with underwriting or product guidelines that
differ from those applied by FNMA and FHLMC. Such non-conforming loans may
involve some greater risk as a result of such different underwriting and
product guidelines. A portion of the loans purchased through the Conduit
Operations are "B" and "C" grade loans, as described below, which may entail
greater credit risks than other non-conforming loans. ICIFC generally does not
acquire mortgage loans with principal balances above $750,000 for "A" quality
loans, and $400,000 for "B" and "C" grade loans.

Non-conforming loans purchased by ICIFC pursuant to its underwriting
programs typically differ from those purchased pursuant to the guidelines
established by FNMA and FHLMC primarily with respect to loan-to-value ratios,
borrower income or credit history, required documentation, interest rates,
borrower occupancy of the mortgaged property and/or property types. To the
extent that these programs reflect underwriting standards different from those
of FNMA and FHLMC, the performance of loans made thereunder may reflect higher
delinquency rates and/or credit losses. The Company believes that non-
conforming mortgage loans produce higher yields without commensurately higher
credit risk when compared to conforming mortgage loans.

ICIFC's focus on the acquisition of non-conforming mortgage loans may affect
the Company's financial performance. For example, the purchase market for non-
conforming loans has typically provided for higher interest rates in order to
compensate for the lower liquidity of such loans, thereby potentially
enhancing the interest income earned by the Company during the accumulation
phase for loans held for sale and during the holding period for loans held for
investment. In addition, due to the lower level of liquidity in non-conforming
loan market, the Company may realize higher returns upon securitization of
such loans than would be realized upon securitization of conforming loans. On
the other hand, such lower levels of liquidity may from time to time cause the
Company to hold such loans or other mortgage-related assets supported by such
loans. In addition, by retaining for investment either the loans or other
mortgage-related assets supported by such loans, the Company assumes the
potential risk of any increased delinquency rates and/or credit losses as well
as interest rate risk.

Mortgage loans acquired by ICIFC are generally secured by first liens and,
to a lesser extent, second liens on single (one-to-four) family residential
properties with either fixed or adjustable interest rates. During the three
months ended March 31, 1996, fixed-rate mortgage loans and ARMs accounted for
approximately 87.8% and 12.2%, respectively, of the mortgage loans purchased
by ICIFC. Fixed-rate mortgage loans have a constant interest rate over the
life of the loan, which is generally 15 or 30 years. The interest rate on an
ARM is typically tied to an index (such as LIBOR or the CMT Index) and is
adjustable periodically at various intervals. Such mortgage loans are
typically subject to lifetime interest rate caps and periodic interest rate
and/or payment caps. The interest rates on ARMs are typically lower than the
average comparable fixed rate loan initially, but may be higher than average
comparable fixed rate loans over the life of the loan. Substantially all
mortgage loans purchased by ICIFC will fully amortize over their remaining
terms. Currently, ICIFC purchases (1) fixed rate mortgage loans that have
original terms to maturity ranging from 10 to 30 years, (2) ARM mortgage loans
that adjust based on LIBOR or the CMT Index, and (3) 5/25 mortgage loans that
adjust on a one-time basis approximately five years following origination to
an interest rate based upon a defined index plus a spread. ICIFC may from time
to time purchase mortgage loans with other interest rate and maturity
characteristics.

A summary of ICIFC's mortgage loan acquisitions by type of loan excluding
net premiums is shown below.

PERIOD FROM
NOVEMBER 20, 1995
THREE MONTHS ENDED THROUGH
MARCH 31, 1996 DECEMBER 31, 1995
------------------ -----------------
(DOLLARS IN MILLIONS,
EXCEPT FOR AVERAGE LOAN SIZE)

Conventional Conforming Loans:
Volume of loans.......................... $ 32.1 $ 152.3
Percentage of total volume............... 11.5% 28.2%
Conventional Non-conforming Loans:
Volume of loans.......................... $ 248.4 $ 388.3
Percentage of total volume............... 88.5% 71.8%
-------- --------
$ 280.5 $ 540.6
======== ========
Fixed Rate Loans:
Volume of loans.......................... $ 246.3 $ 142.9
Percentage of total volume............... 87.8% 26.4%
Adjustable Rate Loans:
Volume of loans.......................... $ 34.2 $ 397.7
Percentage of total volume............... 12.2% 73.6%
-------- --------
$ 280.5 $ 540.6
======== ========
Average Loan Size.......................... $126,229 $143,017

The credit quality of the loans purchased by ICIFC varies depending upon the
specific program under which such loans are purchased. For example, a
principal credit risk inherent in adjustable-rate mortgage loans is the
potential "payment shock" experienced by the borrower as rates rise, which
could result in increased delinquencies and credit losses. In the case of
negative amortization mortgage loans, a portion of the interest due accrues to
the underlying principal balance of the loan, thereby increasing the loan-to-
value ratio of the mortgage loans. As a general rule, mortgage loans with
higher loan-to-value ratios are vulnerable to higher delinquency rates given
the borrower's lower equity investment in the underlying property. Limited
documentation mortgage loans, by contrast, must meet lower loan-to-value
ratios and more rigorous criteria for borrower credit quality in order to
compensate for the reduced level of lender review with respect to the
borrower's earnings history and capacity.

ICIFC's loan purchase activities have and are expected in the future to
continue to focus on those regions of the country where higher volumes of non-
conforming mortgage loans are originated, including California, Colorado,
Florida, Illinois, Maryland, New Jersey, New York, Oregon and Washington. The
highest concentration of non-conforming mortgage loans purchased by ICIFC
relates to properties located in California because of the generally higher
property values and mortgage loan balances prevalent there. At March 31, 1996
76.5% of IMH's mortgage loans held for investment were secured by properties
in California. In addition, of the $1.1 billion in loans acquired during the
year ended December 31, 1995, $814.7 million (or 73.1%) were acquired from
ICIFC's top ten sellers, including ICII, by volume of sales. No sellers other
than ICII or SPTL are an affiliate of the Company. SPTL, ICII and DITECH
Funding Group, each accounted for more than 10% of the total mortgage loans
acquired by ICIFC during 1995.

The following table sets forth the geographic distribution of ICIFC's
mortgage loan acquisitions excluding net premiums.

PERIOD FROM
NOVEMBER 20, 1995
THREE MONTHS ENDED THROUGH
MARCH 31, 1996 DECEMBER 31, 1995
--------------------- -----------------
DOLLAR PERCENTAGE DOLLAR PERCENTAGE
AMOUNT OF TOTAL AMOUNT OF TOTAL
--------- ----------- ------ ----------
(DOLLARS IN MILLIONS)

California.............................. $ 151.0 53.8% $370.6 68.5%
Florida................................. 27.9 10.0 20.7 3.8
New Jersey.............................. 23.2 8.3 22.1 4.1
New York................................ 13.7 4.9 5.7 1.0
Oregon.................................. 8.8 3.1 18.9 3.5
Washington.............................. 8.0 2.8 23.3 4.3
Colorado................................ 6.4 2.3 23.6 4.4
North Carolina.......................... 6.2 2.2 2.4 0.4
Nevada.................................. 6.0 2.1 4.5 0.8
Utah.................................... 4.9 1.7 5.4 1.0
Maryland................................ 3.3 1.2 7.4 1.4
Pennsylvania............................ 3.1 1.1 3.7 0.7
Illinois................................ 2.9 1.0 2.1 0.4
Georgia................................. 1.7 0.6 2.1 0.4
Hawaii.................................. 1.5 0.5 4.4 0.8
Arizona................................. 1.3 0.5 5.9 1.1
Texas................................... 1.3 0.5 1.5 0.3
Virginia................................ 1.3 0.5 2.0 0.4
Other .................................. 8.0 2.9 14.3 2.6
--------- -------- ------ -----
$ 280.5 100.0% $540.6 100.0%
========= ======== ====== =====

To date, a portion of the loans purchased by ICIFC comprise "B" and "C"
grade residential mortgage loans. In general, "B" and "C" grade loans are
residential mortgage loans made to borrowers with lower credit ratings than
borrowers of higher quality, or so called "A" grade mortgage loans, and are
normally subject to higher rates of loss and delinquency than the other non-
conforming loans purchased by ICIFC. As a result, "B" and "C" grade loans
normally bear a higher rate of interest, and are typically subject to higher
fees (including greater prepayment fees and late payment penalties), than non-
conforming loans of "A" quality. In general, greater emphasis is placed upon
the value of the mortgaged property and, consequently, the quality of
appraisals thereof, and less upon the credit history of the borrower in
underwriting "B" and "C" grade mortgage loans than in underwriting "A" grade
loans. In addition, "B" and "C" grade loans are generally subject to lower
loan-to-value ratios than "A" grade loans. Under ICIFC's "B" and "C" mortgage
loan program, underwriting authority is delegated only to correspondents who
meet those strict underwriting guidelines established by ICIFC. See "--
Underwriting and Quality Control."

ICIFC purchases "B" and "C" grade loans on a "servicing-released" basis
rather than on a "servicing-retained" basis due to its belief that control
over the servicing and collection functions with respect to such loans is
important to the realization of a satisfactory return thereon. In connection
therewith, the Company contracted with ICII for the performance of such
servicing functions. In the first quarter of 1996, ICII contracted to sell
substantially all of its mortgage servicing portfolio and began to eliminate a
substantial portion of its mortgage servicing department. In response to
ICII's decision to exit the mortgage servicing business, ICIFC is in the
process of negotiations with another third party sub-servicer. As part of this
process, the Company may in the future form a separate collection group to
assist a new sub-servicer in the servicing of these loans. See "--Servicing
and Master Servicing."

In connection with the securitization of "B" and "C" grade loans, the levels
of subordination required as credit enhancement for the more senior classes of
securities issued in connection therewith are higher than those with respect
to its "A" grade non-conforming loans. Similarly, in connection with the
securitization of mortgage loans secured by second liens, the levels of
subordination required as credit enhancement for the more senior classes of
securities issued in connection therewith are higher than those with respect
to its mortgage loans secured by first liens. Thus, to the extent that the
Company retains any of the subordinated securities created in connection with
such securitizations and losses with respect to such pools of "B" and "C"
grade loans or mortgage loans secured by second liens are higher than
expected, the Company's future earnings could be adversely affected.

Seller Eligibility Requirements. The mortgage loans acquired by the Conduit
Operations are originated by various sellers, including savings and loan
associations, banks, mortgage bankers and other mortgage brokers. Sellers are
required to meet certain regulatory, financial, insurance and performance
requirements established by ICIFC before they are eligible to participate in
its mortgage loan purchase program, and must submit to periodic reviews by
ICIFC to ensure continued compliance with these requirements. ICIFC's current
criteria for seller participation generally include a minimum tangible net
worth requirement ($300,000 in its non-delegated program, $500,000 in its
partially delegated program and $1 million in its fully delegated program, as
described below), approval as a FNMA or FHLMC Seller/Servicer in good standing
and a HUD approved mortgagee in good standing or a financial institution that
is insured by the FDIC or comparable federal or state agency, and that the
seller is examined by a federal or state authority. In addition, sellers are
required to have comprehensive loan origination quality control procedures. In
connection with its qualification, each seller enters into an agreement that
generally provides for recourse by ICIFC against the seller in the event of a
breach of representations or warranties made by the seller with respect to
mortgage loans sold to ICIFC, any fraud or misrepresentation during the
mortgage loan origination process, and upon early payment default on such
loans. As of March 31, 1996, 223 sellers had been approved by ICIFC as being
eligible to participate in the Conduit Operations.

PURCHASE COMMITMENT PROCESS AND PRICING

Master Commitments. As part of its marketing strategy, ICIFC has established
mortgage loan purchase commitments ("Master Commitments") with sellers that,
subject to certain conditions, entitle the seller to sell and obligate ICIFC
to purchase a specified dollar amount of non-conforming mortgage loans over a
period generally ranging from six months to one year. The terms of each Master
Commitment specify whether a seller may sell loans to ICIFC on a mandatory,
best efforts or optional basis, or a combination thereof. Master Commitments
do not generally obligate ICIFC to purchase loans at a specific price, but
rather provide the seller with a future outlet for the sale of its originated
loans based on ICIFC's quoted prices at the time of purchase. Master
Commitments specify the types of mortgage loans the seller is entitled to sell
to ICIFC and generally range from $2 million to $50 million in aggregate
committed principal amount. The provisions of ICIFC's Seller/Servicer Guide
are incorporated in each of the Conduit Operations' Master Commitments and may
be modified by negotiations between the parties. In addition, there are
individualized Master Commitment options available to sellers, which include
alternative pricing structures or specialized loan products. In order to
obtain a Master Commitment, a seller may be asked to pay a non-refundable up
front or non-delivery fee, or both, to the Company. As of March 31, 1996,
ICIFC had outstanding Master Commitments with 28 sellers to purchase mortgage
loans in the aggregate principal amount of $595 million over periods ranging
from six months to one year, of which $93.1 million were committed to be
purchased pursuant to rate-locks (as defined below).

Sellers who have entered into the aforementioned Master Commitments are
expected to continue to sell mortgage loans to the Conduit Operations by
executing individual, bulk or other rate-locks (each, a "rate-lock"). Each
rate-lock, in conjunction with the related Master Commitment, specifies the
terms of the related sale, including the quantity and price of the mortgage
loans or the formula by which the price will be determined, the rate-lock type
and the delivery requirements. Historically, the up front fee paid by a seller
to ICIFC to obtain a

Master Commitment on a mandatory delivery basis has often been refunded pro
rata as the seller delivers loans pursuant to rate-locks. Any remaining fee
after the Master Commitment expires is retained by the Conduit Operations.

Bulk and Other Rate-Locks. ICIFC also acquires mortgage loans from sellers
that are not purchased pursuant to Master Commitments. These purchases may be
made on a bulk or individual rate-lock basis. Bulk rate-locks obligate the
seller to sell and ICIFC to purchase a specific group of loans, generally
ranging from $1 million to $50 million in aggregate committed principal
amount, at set prices on specific dates. Bulk rate-locks enable ICIFC to
acquire substantial quantities of loans on a more immediate basis. The
specific pricing, delivery and program requirements of these purchases are
determined by negotiation between the parties but are generally in accordance
with the provisions of ICIFC's Seller/Servicer Guide. Due to the active
presence of investment banks and other substantial investors in this area,
bulk pricing is extremely competitive. Loans are also purchased from
individual sellers (typically smaller originators of mortgage loans) who do
not wish to sell pursuant to either a Master Commitment or bulk rate-lock. The
terms of these individual purchases are based primarily on ICIFC's
Seller/Servicer Guide and standard pricing provisions, and are offered on a
mandatory basis.

Mandatory, Best Efforts and Optional Rate-Locks. Mandatory rate-locks
require the seller to deliver a specified quantity of loans to ICIFC over a
specified period of time regardless of whether the loans are actually
originated by the seller or whether circumstances beyond the seller's control
prevent delivery. ICIFC is required to purchase all loans covered by the rate-
lock at prices established at the time of rate-lock. If the seller is unable
to deliver the specified loans, it may instead deliver comparable loans
approved by ICIFC within the specified delivery time. Failure to deliver the
specified mortgage loans or acceptable substitute loans under a mandatory
rate-lock obligates the seller to pay ICIFC a penalty, and, if ICIFC's
mortgage loan yield requirements have declined, the present value of the
difference in yield ICIFC would have obtained on the mortgage loans that the
seller agreed to deliver and the yield available on similar mortgage loans
subject to mandatory rate-lock issued at the time of such failure to deliver.
In contrast, mortgage loans sold on a best efforts basis must be delivered to
ICIFC only if they are actually originated by the seller. The best efforts
rate-lock provides sellers with an effective way to sell loans during the
origination process without any penalty for failure to deliver. Optional rate-
locks gives the seller the option to deliver mortgage loans to ICIFC at a
fixed price on a future date and requires the payment of up front fees to
ICIFC. Any up front fees paid in connection with best efforts and optional
rate-locks are retained by ICIFC whether or not the loans are delivered.

Pricing. ICIFC sets purchase prices at least once every business day for
mortgage loans it acquires for its Conduit Operations based on prevailing
market conditions. Different prices are established for the various types of
loans, rate-lock periods and types of rate-locks (mandatory, best efforts or
optional). ICIFC's standard pricing is based on the anticipated price it
receives upon sale or securitization of the loans, the anticipated interest
spread realized during the accumulation period, the targeted profit margin and
the anticipated issuance, credit enhancement and ongoing administrative costs
associated with such sale or securitization. The credit enhancement cost
component of ICIFC's pricing is established for individual mortgage loans or
pools of mortgage loans based upon the characteristics of such loan or loan
pool. As the characteristics of the loan or loan pool vary, this cost
component is correspondingly adjusted upward or downward to reflect the
variation. ICIFC's adjustments are reviewed periodically by management to
reflect changes in the costs of credit enhancement. Adjustments to ICIFC's
standard pricing may also be negotiated on an individual basis under Master
Commitments or bulk or individual rate-locks with sellers. See "--
Securitization and Sale Process."

Following the issuance of a specific rate-lock, ICIFC is subject to the risk
of interest rate fluctuations and enters into hedging transactions to diminish
such risk. Hedging transactions may include mandatory or optional forward
sales of mortgage loans or mortgage-backed securities, interest rate caps,
floors and swaps, mandatory forward sales, mandatory or optional sales of
futures and other financial futures transactions. The nature and quantity of
hedging transactions are determined by the management of ICIFC based on
various factors, including market conditions and the expected volume of
mortgage loan purchases. Gains and losses on hedging transactions are recorded
as incurred.

UNDERWRITING AND QUALITY CONTROL

Purchase Guidelines. ICIFC has developed comprehensive purchase guidelines
for the acquisition of mortgage loans by the Conduit Operations. Subject to
certain exceptions, each loan purchased must conform to the loan eligibility
requirements specified in ICIFC's Seller/Servicer Guide with respect to, among
other things, loan amount, type of property, loan-to-value ratio, type and
amount of insurance, credit history of the borrower, income ratios, sources of
funds, appraisals and loan documentation. ICIFC also performs a legal
documentation review prior to the purchase of any mortgage loan. ICIFC either
delegates the underwriting function to its correspondents or performs the
function itself. Additionally, for mortgage loans that are underwritten by
contract underwriters, ICIFC does not perform a full underwriting review prior
to purchase, but instead relies on the credit review and analysis performed by
the contract underwriter, as well as its own pre-purchase eligibility process
to ensure that the loan meets the program acceptance guidelines and a post-
purchase quality control review.

Underwriting Methods. ICIFC has established a delegated underwriting
program, which is similar in concept to the delegated underwriting programs
established by FNMA and FHLMC. Under this program, qualified sellers are
required to underwrite loans in compliance with ICIFC's underwriting
guidelines as set forth in ICIFC's Seller/Servicer Guide or an individual
Master Commitment. As part of the approval process for a seller to become a
delegated underwriter, the seller must submit a small sample of loans for a
pre-purchase quality control review by ICIFC. If the submitted loans comply
with the Company's underwriting guidelines and the seller meets ICIFC's
financial and performance criteria, the seller will be approved for the
delegated underwriting program. In connection with its approval, the seller
must represent and warrant to ICIFC that all mortgage loans sold to ICIFC will
comply with ICIFC's underwriting guidelines. The current financial, historical
loan quality and other criteria for seller participation in this program
generally include a minimum net worth requirement and verification of the
seller's good standing with FNMA and FHLMC. As of March 31, 1996, 142 sellers
had qualified by ICIFC for participation in the delegated underwriting
program.

The delegated underwriting program consists of two separate subprograms.
ICIFC's principal delegated underwriting subprogram is a fully delegated
program designed for loan sellers that meet higher financial and performance
criteria than those applicable to sellers generally. Qualifying sellers have
delegated underwriting authority for all mortgage products under this
subprogram, except for "B" and "C" grade loans. The second subprogram is a
partially delegated program pursuant to which sellers only have delegated
underwriting authority for ICIFC's conforming mortgage loan products.

Mortgage loans acquired under ICIFC's non-delegated underwriting program are
either fully underwritten by ICIFC's underwriting staff or involve the use of
contract underwriters. ICIFC has contracted with several national mortgage
insurance firms that conduct contract underwriting for mortgage loan
acquisitions by ICIFC. Under these contracts, ICIFC relies on the credit
review and analysis of the contract underwriter, as well as its own pre-
purchase eligibility review to ensure that the loan meets program acceptance,
its own follow-up quality control procedures and the representations and
warranties of the contract underwriter.

Loans that are not acquired under either delegated or contract underwriter
methods are fully underwritten by ICIFC's underwriting staff. In such cases,
ICIFC performs a full credit review and analysis to ensure compliance with its
loan eligibility requirements. This review specifically includes, among other
things, an analysis of the underlying property and associated appraisal and an
examination of the credit, employment and income history of the borrower.
Under all of these methods, loans are purchased only after completion of a
legal documentation and eligibility criteria review.

Although the delegated underwriting program could be deemed to present
inherently greater risks due to the lower level of individual loan review, the
Company believes that this risk is mitigated by the higher net worth
requirements applicable to loan sellers eligible for the delegated
underwriting program and ICIFC's eligibility control prior to purchase,
thereby enhancing the financial support for the representations and warranties
made by such sellers. ICIFC also relies on such sellers' experience and
demonstrated performance with the government-sponsored entities referred to
above with respect to the delegated underwriting program.

Under all of ICIFC's underwriting methods, loan documentation requirements
for verifying the borrowers' income and assets, vary according to loan-to-
value ratios and other factors. This variation is necessary to be competitive
and responsive to the needs of the non-conforming mortgage loan sellers.
Generally, as the standards for required documentation are lowered, borrowers'
down payment requirements are increased and the required loan-to-value ratios
are decreased. These types of loans with less documentation are reviewed on a
risk analysis underwriting basis, similar to the underwriting analysis
utilized by mortgage insurance companies. Reduced documentation loans require
the borrower to have a stronger credit history and larger cash reserves to
show a savings pattern history, and the appraisal of the property is validated
by either an enhanced desk or field review. Within the underwriting philosophy
of the ICIFC guidelines, the underwriters utilize a "risk analysis" approach
to determine the borrower's ability and willingness to repay the debt and to
determine if the property taken as security has sufficient value to recover
the debt in the event that the loan defaults. Each loan is reviewed for
compensating factors (i.e., credit reports, sufficient assets, appraisal, job
stability, savings pattern), and overall compensating factors are reviewed to
fully analyze the risk. Full documentation is requested if it is the judgment
of the underwriter that the compensating factors are insufficient for loan
approval.

Quality Control. Ongoing quality control reviews are conducted by ICIFC to
ensure that the mortgage loans purchased meet its quality standards. The type
and extent of the quality control review depend on the nature of seller and
the characteristics of the loans. Loans acquired under the delegated
underwriting program are reviewed in accordance with the quality control
procedures described above. ICIFC reviews on a post-purchase basis a portion
of all loans submitted with delegated underwriting to determine that the loans
were purchased in compliance with the guidelines set forth by ICIFC. ICIFC
reviews a higher portion of certain categories of mortgage loans, such as
loans with reduced documentation, loans with higher loan-to-value ratios
(above 80%), cash out refinances, lender optional insurance (self insurance)
and loans above $500,000 in principal amount. In performing a quality control
review on a loan, ICIFC analyzes the underlying property appraisal and
examines the credit and income history of the borrower. In addition, all
documents submitted in connection with the purchase of the loans, including
insurance policies, title policies, deeds of trust or mortgages and promissory
notes, are examined for compliance with ICIFC's guidelines and to ensure
compliance to state and federal regulations.

SECURITIZATION AND SALE PROCESS

General. The Conduit Operations primarily uses a warehouse line of credit
from IWLG and equity to finance the acquisition of mortgage loans from
correspondents. When a sufficient volume of mortgage loans with similar
characteristics has been accumulated, generally $100 million to $200 million,
ICIFC will securitize them through the issuance of mortgage-backed securities
in the form of a REMIC or resell them in bulk whole loan sales. The period
between the time ICIFC commits to purchase a mortgage loan and the time it
sells or securitizes such mortgage loan generally range from 10 to 90 days,
depending on certain factors, including the length of the purchase commitment
period, the loan volume by product type and the securitization process.

Any decision to form REMICs or to sell the loans in bulk by ICIFC is
influenced by a variety of factors. REMIC transactions are generally accounted
for as sales of the mortgage loans and can eliminate or minimize any long-term
residual investment in such loans. REMIC securities consist of one or more
classes of "regular interests" and a single class of "residual interest." The
regular interests are tailored to the needs of investors and may be issued in
multiple classes with varying maturities, average lives and interest rates.
These regular interests are predominantly senior securities but, in
conjunction with providing credit enhancement, may be subordinated to the
rights of other regular interests. The residual interest represents the
remainder of the cash flows from the mortgage loans (including, in some
instances, reinvestment income) over the amounts required to be distributed to
the regular interests. In some cases, the regular interests may be structured
so that there is no significant residual cash flow, thereby allowing ICIFC to
sell its entire interest in the mortgage loans. As a result, in some cases,
all of the capital originally invested in the mortgage loans by the Company is
redeployed in the Conduit Operations. As part of its operations, ICIFC may
retain regular and residual interests on a short-term or long-term basis. In
the first quarter of 1996, the Conduit Operations created its first Post-
Contribution Transaction REMIC security composed of $175.8 million of fixed
rate non-conforming principal balance of mortgage loans.

Credit Enhancement. Any REMICs or CMOs created by the Conduit Operations or
the Long-Term Investment Operations are expected to be structured so that one
or more of the classes of such securities are rated investment grade by at
least one nationally recognized rating agency. In contrast to Agency
Certificates in which the principal and interest payments are guaranteed by
the U.S. government or an agency thereof, securities created by the Conduit
Operations or the Long-Term Investment Operations do not benefit from any such
guarantee. The ratings for the Conduit Operations' mortgage-backed securities
or the Long-Term Investment Operations' CMOs are based upon the perceived
credit risk by the applicable rating agency of the underlying mortgage loans,
the structure of the securities, and the associated level of credit
enhancement. Credit enhancement is designed to provide protection to the
security holders in the event of borrower defaults and other losses including
those associated with fraud or reductions in the principal balances or
interest rates on mortgage loans as required by law or a bankruptcy court.

The Conduit Operations or the Long-Term Investment Operations can utilize
multiple forms of credit enhancement, including special hazard insurance,
private mortgage pool insurance reserve funds, letters of credit, surety
bonds, over-collateralization and subordination or any combination thereof. In
determining whether to provide credit enhancement through subordination or
other credit enhancement methods, the Conduit Operations and the Long-Term
Investment Operations take into consideration the costs associated with each
method. The Company's Post-Contribution Transaction $175.8 million REMIC
security and $296.3 million CMO financing were credit enhanced by a mortgage
pool insurance bringing the ratings of the senior bonds issued in connection
therewith to the highest rating established by a nationally recognized rating
agency.

Each series of mortgage-backed securities is typically fully payable from
the mortgage assets underlying such series, and the recourse of investors is
limited to such assets and any associated credit enhancement features, such as
senior/subordinated structures. To the extent the Company holds subordinated
securities, a form of credit enhancement, the Company generally bears all
losses prior to the related senior security holders. Generally, any losses in
excess of the credit enhancement obtained are borne by the security holders.
Except in the case of a breach of the standard representations and warranties
made by the Company when mortgage loans are securitized, such securities are
non-recourse to the Company. Typically, the Company has recourse to the
sellers of loans for any such breaches, but there are no assurance of the
sellers' abilities to honor their respective obligations.

Ratings of mortgage-backed securities are based primarily upon the
characteristics of the pool of underlying mortgage loans and associated credit
enhancement. A decline in the credit quality of such pools (including
delinquencies and/or credit losses above initial expectations), or of any
third party credit enhancer, or adverse developments in general economic
trends affecting real estate values or the mortgage industry, could result in
downgrades of such ratings.

WAREHOUSE LENDING OPERATIONS

GENERAL

The Company's third line of business is its Warehouse Lending Operations.
Such operations primarily consist of warehouse lending for approved mortgage
banks acting as correspondents of ICIFC and other mortgage banks. Warehouse
lending facilities typically provide short-term revolving lines of credit to
finance mortgage loans from the time of closing the loan to the time of its
sale or other settlement with the pre-approved investor. Generally, the non-
conforming mortgage loans funded with such warehouse lines of credit are
acquired by ICIFC. The specific terms of any warehouse line of credit,
including the amount, are determined based upon the financial strength,
historical performance and other qualifications of the borrower. As a
warehouse lender, IWLG is a secured creditor of the mortgage bankers and
brokers to which it extends credit and subject to the risks inherent in that
status, including the risks of borrower default and bankruptcy. Any claim of
IWLG as a secured lender in a bankruptcy proceeding may be subject to
adjustment and delay.

In addition to providing warehouse lines to certain of the Conduit
Operations' correspondents, IWLG provided a $600 million warehouse line to
ICIFC. The terms of the warehouse line are based on Bank of America's prime
rate with advance rates between 90% and 98% of the fair value of the mortgage
loans outstanding. The warehouse line balances outstanding on IWLG's balance
sheet are structured to qualify under the REIT asset tests and to generate
income qualifying under the 75% gross income test. The warehouse lines are
non-recourse and IWLG can only look to the sale or liquidation of the mortgage
loans as a source of repayment.

At March 31, 1996, the Company had $527.7 million of warehouse lines of
credit outstanding to nine borrowers. IWLG finances its Warehouse Lending
Operations through reverse repurchase agreements and equity. At March 31,
1996, IWLG had entered into facilities in the principal amount of $323.0
million and $308.6 million with two investment banks.

FMAC

The Company intends to use a portion of the net proceeds of this Offering,
together with the proceeds of other financing, to establish up to a
$100 million warehouse facility with FMAC at terms to be negotiated in an
arms-length transaction. The other financing which the Company intends to use
to finance advances under this warehouse facility consist of borrowings under
reverse repurchase agreements, which it expects to establish with one or more
third party institutional lenders.

FMAC makes long-term, fixed rate loans to established franchisees of major
restaurant franchise concepts, such as Burger King, Taco Bell, KFC, TGI
Friday's, Wendy's, Pizza Hut and Hardee's. The loans are then securitized into
investment grade structures and sold to institutional investors. In parallel
with the accumulation of the collateral and the structuring of the securities
sold in each securitization, independent rating agencies are retained to rate
each series of securities issued. In each securitization completed to date,
the securities have received investment grade ratings (BBB- and above).

HEDGING

The Company conducts certain hedging activities in connection with both its
Long-Term Investment Operations and its Conduit Operations.

Long-term Investment Operations. To the extent consistent with IMH's
election to qualify as a REIT, the Company follows a hedging program intended
to protect against interest rate changes and to enable the Company to earn net
interest income in periods of generally rising, as well as declining or
static, interest rates. Specifically, the Company's hedging program is
formulated with the intent to offset the potential adverse effects resulting
from (1) interest rate adjustment limitations on its mortgage loans and
securities backed by mortgage loans and (2) the differences between the
interest rate adjustment indices and interest rate adjustment periods of its
adjustable rate mortgage loans and mortgage-backed securities secured by such
loans and related borrowings. As part of its hedging program, the Company also
monitors on an ongoing basis the prepayment risks that arise in fluctuating
interest rate environments.

The Company's hedging program encompasses a number of procedures. First, the
Company structures its commitments to purchase mortgage loans so that the
mortgage loans purchased will have interest rate adjustment indices and
adjustment periods that, on an aggregate basis, correspond as closely as
practicable to the interest rate adjustment indices and interest rate
adjustment periods of the anticipated financing source. In addition, the
Company will structure its borrowing agreements to have a range of different
maturities (although substantially all will have maturities of less than one
year). As a result, the Company adjusts the average maturity of its borrowings
on an ongoing basis by changing the mix of maturities as borrowings come due
and are renewed. In this way, the Company minimizes any differences between
interest rate adjustment periods of mortgage loans and related borrowings that
may occur due to prepayments of mortgage loans or other factors.

The Company may occasionally purchase interest rate caps to limit or
partially offset adverse changes in interest rates associated with its
borrowings. In a typical interest rate cap agreement, the cap purchaser makes
an initial lump sum cash payment to the cap seller in exchange for the
seller's promise to make cash payments to the purchaser on fixed dates during
the contract term if prevailing interest rates exceed the rate specified in
the contract. In this way, the Company generally hedges as much of the
interest rate risk arising from lifetime rate caps on its mortgage loans and
from periodic rate and/or payment caps as the Company determines is in the
best interests of the Company, given the cost of such hedging transactions and
the need to maintain IMH's status as a REIT. Such periodic caps on the
Company's mortgage loans may also be hedged by the purchase of mortgage
derivative securities. Mortgage derivative securities can be effective hedging
instruments in certain situations as the value and yields of some of these
instruments tend to increase as interest rates rise and tend to decrease in
value and yields as interest rates decline, while the experience for others is
the converse. The Company intends to limit its purchases of mortgage
derivative securities to investments that qualify as Qualified REIT Assets or
Qualified Hedges so that income from such investments will constitute
qualifying income for purposes of the 95% and 75% gross income tests. To a
lesser extent, the Company, through its Conduit Operations, enters into
interest rate swap agreements, buys and sells financial futures contracts and
options on financial futures contracts and trade forward contracts as a hedge
against future interest rate changes; however, the Company will not invest in
these instruments unless the Company and the Manager are exempt from the
registration requirements of the Commodity Exchange Act or otherwise comply
with the provisions of that Act. The REIT provisions of the Code may restrict
the Company's ability to purchase certain instruments and may severely
restrict the Company's ability to employ other strategies. See "Federal Income
Tax Considerations." In all its hedging transactions, the Company deals only
with counterparties that the Company believes are sound credit risks. During
the three months ended March 31, 1996 and the year ended December 31, 1995,
the Company had not purchased any interest rate caps, swaps or other hedging
instruments.

Conduit Operations. In conducting its Conduit Operations, ICIFC is subject
to the risk of rising mortgage interest rates between the time it commits to
purchase mortgage loans at a fixed price and the time it sells or securitizes
those mortgage loans. To mitigate this risk, ICIFC enters into transactions
designed to hedge interest rate risks, which may include mandatory and
optional forward selling of mortgage loans or mortgage-backed securities,
interest rate caps, floors and swaps, and buying and selling of futures and
options on futures. The nature and quantity of these hedging transactions are
determined by the management of ICIFC based on various factors, including
market conditions and the expected volume of mortgage loan purchases.

Costs and Limitations. The Company has implemented a hedging program
designed to provide a level of protection against interest rate risks.
However, an effective hedging strategy is complex, and no hedging strategy can
completely insulate the Company from interest rate risks. Moreover, as noted
above, certain of the federal income tax requirements that IMH must satisfy to
qualify as a REIT limit the Company's ability to fully hedge its interest rate
risks. The Company monitors carefully, and may have to limit, its hedging
strategies to assure that it does not realize excessive hedging income or hold
hedging assets having excess value in relation to total assets, which would
result in IMH's disqualification as a REIT or, in the case of excess hedging
income, the payment of a penalty tax for failure to satisfy certain REIT
income tests under the Code, provided such failure was for reasonable cause.
See "Federal Income Tax Considerations."

In addition, hedging involves transaction and other costs, and such costs
increase dramatically as the period covered by the hedging protection
increases and also increase in periods of rising and fluctuating interest
rates. Therefore, the Company may be prevented from effectively hedging its
interest rate risks, without significantly reducing the Company's return on
equity.

SERVICING AND MASTER SERVICING

ICIFC currently acquires substantially all of its mortgage loans on a
"servicing released" basis and thereby acquires the servicing rights. ICIFC
subcontracts all of its servicing obligations under such loans to ICII
pursuant to a sub-servicing agreement. The Company believes that the terms of
such agreement are comparable to industry standards. In the first quarter of
1996, ICII contracted to sell substantially all of its mortgage servicing
portfolio and began to eliminate a substantial portion of its mortgage
servicing department. In response to ICII's decision to exit the mortgage
servicing business, ICIFC is in the process of negotiations with another third
party sub-servicer. ICIFC expects that the transfer of servicing
responsibilities will take place in June 1996. However, there are no
assurances that ICIFC will be able to complete the transfer by this date.
Servicing includes collecting and remitting loan payments, making required
advances, accounting for principal and interest, holding escrow or impound
funds for payment of taxes and insurance, if applicable, making required
inspections of the mortgaged property, contacting delinquent borrowers and
supervising foreclosures and property dispositions in the event of unremedied
defaults in accordance with the Company's guidelines. Servicing fees generally
range from 0.25% to 0.375% per annum on the declining principal balances of
the loans serviced.

The following table sets forth certain information regarding the ICIFC's
servicing portfolio of loans for the periods shown.

PERIOD FROM
NOVEMBER 20, 1995
THREE MONTHS ENDED THROUGH
MARCH 31, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN MILLIONS)

Beginning servicing portfolio............. $ 512.1 $ -- (1)
Loans added to the servicing portfolio.... 280.5 540.6
Loans sold servicing released and
principal paydowns....................... (140.7) (28.5)
------- -------
Ending servicing portfolio................ $ 651.9 $ 512.1
======= =======

- --------
(1) Pursuant to the Contribution Transaction, ICII retained ICIFC's servicing
portfolio at November 20, 1995.

In the future, ICIFC expects to offer its sellers of mortgage loans the
right to retain servicing. In the case of servicing retained mortgage loans
the Company will enter into agreements (the "Servicing Agreements") with the
sellers of mortgage loans, to service the mortgage loans they sell to the
Company. Each Servicing Agreement will require the servicer to service the
Company's mortgage loans in a manner generally consistent with FNMA and FHLMC
guidelines and procedures and with any servicing guidelines promulgated by the
Company. Each servicer will collect and remit principal and interest payments,
administer mortgage escrow accounts, submit and pursue insurance claims and
initiate and supervise foreclosure proceedings on the mortgage loans so
serviced. Each servicer will also provide accounting and reporting services
required by the Company for such loans. The servicer will be required to
follow such collection procedures as are customary in the industry. The
servicer may, at its discretion, arrange with a defaulting borrower a schedule
for the liquidation of delinquencies, provided primary mortgage insurance
coverage is not adversely affected. Each Servicing Agreement will provided
that the servicer may not assign any of its obligations with respect to the
mortgage loans serviced for the Company, except with the Company's consent. At
March 31, 1996, ICIFC had no servicers or sub-servicers other than ICII.

Each servicer will be required to pay all expenses related to the
performance of its duties under its Servicing Agreement. The servicer will be
required to make advances of principal and interest, taxes and required
insurance premiums that are not collected from borrowers with respect to any
mortgage loan, only if the servicer determines that such advances are
recoverable from the mortgagor, insurance proceeds or other sources with
respect to such mortgage loan. If such advances are made, the servicer
generally will be reimbursed prior to the Company receiving the remaining
proceeds. The servicer also will be entitled to reimbursement by the Company
for expenses incurred by it in connection with the liquidation of defaulted
mortgage loans and in connection

with the restoration of mortgaged property. If claims are not made or paid
under applicable insurance policies or if coverage thereunder has ceased, the
Company suffers a loss to the extent that the proceeds from liquidation of the
mortgaged property, after reimbursement of the servicer's expenses in the
sale, are less than the principal balance of the related mortgage loan. The
servicer will be responsible to the Company for any loss suffered as a result
of the servicer's failure to make and pursue timely claims or as a result of
actions taken or omissions made by the servicer which cause the policies to be
canceled by the insurer. Each servicer will be required to represent and
warrant that the mortgage loans it services comply with any loan servicing
guidelines promulgated by the Company and agree to repurchase, at the request
of the Company, any mortgage loan it services in the event that the servicer
fails to make such representations or warranties or any such representation or
warranty is untrue.

The Company will terminate a Servicing Agreement with any servicer upon the
happening of one or more of the events specified in the Servicing Agreement.
Such events relate generally to the servicer's proper and timely performance
of its duties and obligations under the Servicing Agreement and the servicer's
financial stability. In addition, the Company will have the right to terminate
any Servicing Agreement without cause upon 30 days' notice and upon payment of
a termination fee that is competitive with that which is obtainable generally
in the industry. The termination fee will be based on the aggregate
outstanding principal amount of the loans then serviced under the agreement.
With respect to mortgage loans that support CMOs or other mortgage-backed
securities, the Company may not be able to terminate a servicer without the
approval of the trustee or bond insurer for such securities.

As is customary in the mortgage loan servicing industry, servicers are
entitled to retain any late payment charges, penalties and assumption fees
collected in connection with the mortgage loans. The servicers receive any
benefit derived from interest earned on collected principal and interest
payments between the date of collection and the date of remittance to the
Company and from interest earned on tax and insurance impound funds. The
servicer will be required to remit to the Company no later than the 18th day
of each month all principal and interest due from borrowers on the first day
of such month.

ICIFC will generally perform the function of master servicer with respect to
mortgage loans it sells or securitizes. The master servicer's function
includes collecting loan payments from servicers of loans and remitting loan
payments, less master servicing fees receivable and other fees, to a trustee
or other purchaser for each series of mortgage-backed securities or loans
master serviced. In addition, as master servicer, ICIFC monitors compliance
with its servicing guidelines and is required to perform, or to contract with
a third party to perform, all obligations not adequately performed by any
servicer. A master servicer typically employs servicers to carry out servicing
functions. Servicers typically perform servicing functions for the master
servicer as independent contractors. ICIFC is the master servicer for the
$175.4 million fixed rate REMIC security it issued in February 1996. In
addition, ICIFC acts as the servicer or master servicer for all loans acquired
by the Long-Term Investment Operations. The master servicer's responsibility
with respect to the Long-Term Investment Operations' mortgage investment
portfolio is to provide management, guidance, valuation and accounting.

As compensation for master servicing services performed to IMH, ICIFC
charges a monthly fee of 0.02% based on the outstanding principal balance of
each such loan master serviced by it as of the last day of each month. ICIFC
has represented to IMH that this fee is competitive with that which is
obtainable generally in the industry. With respect to its function as a
servicer for IMH, ICIFC and IMH entered into a Servicing Agreement effective
on November 20, 1995 having terms substantially similar to those described
above.

The following table shows the Company's delinquency statistics for its
servicing portfolio for the periods presented.

AT DECEMBER 31,
AT MARCH 31, 1996 1995
------------------- -------------------
% OF % OF
NUMBER OF SERVICING NUMBER OF SERVICING
LOANS PORTFOLIO LOANS PORTFOLIO
--------- --------- --------- ---------

Loans delinquent for:
30-59 days............................ 84 1.83% 26 0.74%
60-89 days............................ 7 0.15 --
90 days+.............................. 2 0.04 -- --
--- ---- --- ----
Total Delinquencies................. 93 2.02% 26 0.74%
=== ==== === ====

The loans purchased by the Company since the Contribution Transaction and
thereafter securitized and sold in the secondary market have not been
outstanding for any periods comencing earlier than November 20, 1995.
Consequently, the Company's delinquency and foreclosure experience to date may
not be indicative of future results.

During periods of declining interest rates, prepayments of mortgage loans
increase as homeowners look to refinance at lower rates, resulting in a
decrease in the value of the servicing portfolio. Mortgage loans with higher
interest rates are more likely to result in prepayments. For a discussion
regarding how prepayments may affect the Company's operations, see "Risk
Factors--Changes in Interest Rates; Prepayment Risks." The following table
sets forth certain information regarding the number of and aggregate principal
balance of the mortgage loans serviced by the Company, including both fixed
and adjustable rate loans, at various mortgage interest rates.

AT MARCH 31, 1996 AT DECEMBER 31, 1995
-------------------------------- --------------------------------
AGGREGATE WEIGHTED AGGREGATE WEIGHTED
NUMBER PRINCIPAL AVERAGE NUMBER PRINCIPAL AVERAGE
OF LOANS BALANCE INTEREST RATE OF LOANS BALANCE INTEREST RATE
-------- --------- ------------- -------- --------- -------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)

Less than 5%............ 4 $ 503 4.79% -- $ -- -- %
5.00-5.49............... 5 693 5.18 -- -- --
5.50-5.99............... 7 1,305 5.75 6 976 5.74
6.00-6.49............... 95 13,458 6.20 84 12,014 6.22
6.50-6.99............... 112 17,074 6.72 85 13,693 6.68
7.00-7.49............... 199 38,140 7.22 146 29,157 7.22
7.50-7.99............... 563 103,955 7.71 505 96,681 7.71
8.00-8.49............... 793 141,134 8.21 727 132,122 8.20
8.50-8.99............... 1,343 215,596 8.70 797 133,324 8.70
9.00-9.49............... 349 48,120 9.15 218 33,031 9.17
9.50-9.99............... 172 23,314 9.67 108 16,939 9.68
10.00-10.49............. 69 7,477 10.17 49 6,240 10.14
10.50-10.99............. 73 7,955 10.67 55 6,832 10.66
11.00-11.49............. 18 2,080 11.16 11 1,481 11.11
11.50+.................. 796 31,068 13.38 742 29,633 13.53
----- -------- ----- --------
4,598 $651,872 8.57% 3,533 $512,127 8.58%
===== ======== ===== ========

The following table sets forth the geographic distribution of the Company's
servicing portfolio.

AT MARCH 31, 1996 AT DECEMBER 31, 1995
---------------------------- ----------------------------
% OF % OF
AGGREGATE AGGREGATE AGGREGATE AGGREGATE
NUMBER PRINCIPAL PRINCIPAL NUMBER PRINCIPAL PRINCIPAL
OF LOANS BALANCE BALANCE OF LOANS BALANCE BALANCE
-------- --------- --------- -------- --------- ---------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)

California........... 2,573 $422,034 64.74% 2,175 $356,931 69.70%
Florida.............. 383 39,684 6.09 181 19,958 3.90
New Jersey........... 247 31,507 4.83 152 18,848 3.68
Washington........... 204 23,522 3.61 186 21,522 4.20
Oregon............... 202 21,933 3.36 159 17,433 3.40
Colorado............. 167 22,523 3.46 155 20,634 4.03
New York............. 107 14,929 2.29 39 5,663 1.11
Utah................. 92 7,440 1.14 71 5,404 1.06
Nevada............... 80 9,915 1.52 41 4,458 0.87
Maryland............. 76 7,864 1.21 64 6,008 1.17
Arizona.............. 75 7,042 1.08 60 5,648 1.10
Illinois............. 36 4,510 0.69 13 1,394 0.27
Georgia.............. 33 3,521 0.54 18 2,144 0.42
Hawaii............... 26 4,137 0.63 23 3,499 0.68
Texas................ 23 2,862 0.44 12 1,391 0.27
Virginia............. 22 2,044 0.31 17 1,448 0.28
Massachusetts........ 15 1,885 0.29 8 1,377 0.27
Others (1)........... 237 24,520 3.77 159 18,367 3.59
----- -------- ----- ----- -------- -----
4,598 $651,872 100.0% 3,533 $512,127 100.0%
===== ======== ===== ===== ======== =====

- --------
(1) No other state accounted for greater than 1% of the Company's mortgage
loan servicing portfolio.

REGULATION

The rules and regulations applicable to the Conduit Operations, among other
things, prohibit discrimination and establish underwriting guidelines that
include provisions for inspections and appraisals, require credit reports on
prospective borrowers and fix maximum loan amounts. Mortgage loan acquisition
activities are subject to, among other laws, the Equal Credit Opportunity Act,
Federal Truth-in-Lending Act and the Real Estate Settlement Procedures Act and
the regulations promulgated thereunder that prohibit discrimination and
require the disclosure of certain basic information to mortgagors concerning
credit terms and settlement costs.

Subsequent to November 20, 1995, ICIFC applied and became an approved FNMA
seller/servicer. ICIFC is currently in the process of applying with FHLMC to
become an approved FHLMC seller/servicer. Upon approval, the Conduit
Operations will be subject to the rules and regulations of FNMA and FHLMC with
respect to acquiring, processing, selling and servicing conforming mortgage
loans. In addition, ICIFC will be required annually to submit to FNMA and
FHLMC audited financial statements, and each regulatory entity has its own
financial requirements for sellers/servicers. For any conforming mortgage loan
activities, ICIFC's affairs would also be subject to examination by FNMA and
FHLMC at any time to assure compliance with the applicable regulations,
policies and procedures.

In addition, the elimination of or a substantial reduction in the current
home mortgage interest tax deduction could curtail mortgage loan originations,
which could materially adversely affect the Company's results of operations
and financial condition.

Additionally, there are various state and local laws and regulations
affecting the Conduit Operations. ICIFC is licensed in those states requiring
such a license. Mortgage operations also may be subject to applicable state
usury statutes. The Company is presently in material compliance with all
material rules and regulations to which it is subject.

COMPETITION

In purchasing non-conforming mortgage loans and issuing securities backed by
such loans, the Company competes with established mortgage conduit programs,
investment banking firms, savings and loan associations, banks, thrift and
loan associations, finance companies, mortgage bankers, insurance companies,
other lenders and other entities purchasing mortgage assets. Continued
consolidation in the mortgage banking industry may also reduce the number of
current sellers to the Conduit Operations, thus reducing the Company's
potential customer base, resulting in ICIFC's purchasing a larger percentage
of mortgage loans from a smaller number of sellers. Such changes could
negatively impact the Conduit Operations. Mortgage-backed securities issued by
the Conduit Operations and the Long-Term Investment Operations face
competition from other investment opportunities available to prospective
investors.

The Company faces competition in its Conduit Operations and Warehouse
Lending Operations from other financial institutions, including but not
limited to banks and investment banks. Many of the institutions with which the
Company competes in its Conduit Operations and Warehouse Lending Operations
have significantly greater financial resources than the Company.

The Company's operations may be affected by the activities of ICII and its
affiliates. As an end-investor in non-conforming mortgage loans, SPTL may
compete with the Company as this activity is not restricted by the Non-Compete
Agreement. Also, Southern Pacific Funding Corporation is a wholly-owned
subsidiary of ICII whose business is primarily to act as a wholesale
originator and a bulk purchaser of non-conforming mortgage loans. These
activities are not restricted by the Non-Compete Agreement. In addition, after
the expiration of the Non-Compete Agreement, ICII or any 25% entity may
compete with the Company's Long-Term Investment Operations, the Conduit
Operations and the Warehouse Lending Operations. While the Company believes
such activities will not have a material adverse effect on the Company's
operations there can be no assurance of this.

EMPLOYEES

As of March 31, 1996, ICIFC and IWLG employed 60 and three persons,
respectively. However, as part of the transition from a division or subsidiary
of ICII to ICIFC, some employees are shared by both entities although ICII and
ICIFC expect such sharing to end prior to December 31, 1996. Expenses
associated with these employees are shared by both parties in relation to the
time spent working for each entity. The Company believes that relations with
its employees are good. The Company is not a party to any collective
bargaining agreement.

FACILITIES

The Company's executive offices and administrative facilities occupy
approximately 10,000 square feet of space in Santa Ana Heights, California.
The Company subleases its facilities from ICII pursuant to a sublease
agreement expiring in 2002 at an aggregate monthly rental of approximately
$12,900. The terms of the sublease allow for increases in rent as dictated by
the master lease. Management believes that the terms of the sublease are at
least as favorable as could have been obtained from an unaffiliated third
party. Management believes that these facilities are adequate for the
Company's foreseeable needs and that alternate space at comparable rental
rates is available, if necessary.

LEGAL PROCEEDINGS
ComUnity National Asset Corporation, a Maryland corporation v. Thomas O.
Markel, Jr., an individual; Homemac Mortgage Bankers, a business association
of unknown form; Homemac Corporation, a California corporation; Homemac
Finance Corporation; Homemac Institutional Mortgage Corporation, a California
corporation; Imperial Credit Mortgage Holdings, Inc., a Maryland corporation;
and DOES 1 through 100, inclusive, Orange County Superior Court Case No.
761786.

On April 1, 1996, ComUnity National Asset Corporation ("ComUnity") filed a
lawsuit in Orange County Superior Court against Thomas O. Markel, Jr., several
Homemac entities, and IMH. The complaint seeks damages for statutory and
common law misappropriation of trade secrets, restitution for unfair
competition, damages for negligence and conversion.

ComUnity seeks damages in an unspecified amount, but in no event less than
$200,000, alleging that said amount is not less than the amount spent and/or
obligations incurred by ComUnity in setting up its business and organizational
plan to become a REIT dealing primarily in B and C grade mortgage loans and to
take ComUnity public in an initial public offering, together with punitive
damages. ComUnity is also seeking attorneys' fees and costs. ComUnity alleges
that IMH wrongfully received consideration in the form of, among other things,
reduced expenses and legal fees, salary, wages, stock options, and other forms
of consideration arising out of the commercial exploitation of ComUnity
confidential information, and that ComUnity is also entitled to an order of
restitution compelling IMH and the other defendants to pay to ComUnity all
profits from the commercial exploitation of information allegedly received
from ComUnity. The Company believes that the complaint is without merit and
intends to vigorously defend the action.

Other than the foregoing, the Company is not a party to any material legal
proceedings.

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.

DIRECTORS AND EXECUTIVE OFFICERS

The Company was incorporated in the State of Maryland on August 28, 1995.
The following table sets forth certain information with respect to the
directors and executive officers of IMH, ICIFC and IWLG:

NAME AGE POSITION
---- --- --------

H. Wayne Snavely.................... 54 Chairman of the Board of IMH
Joseph R. Tomkinson................. 48 Vice Chairman of the Board and Chief
Executive Officer of IMH and Chairman
of the Board and Chief Executive
Officer of ICIFC and IWLG
William S. Ashmore.................. 46 President and Chief Operating Officer
of IMH and Executive Vice President
and a Director of ICIFC and IWLG
Richard J. Johnson.................. 34 Senior Vice President, Chief
Financial Officer, Treasurer and
Secretary of IMH, ICIFC and IWLG and
a Director of ICIFC
Mary C. Glass....................... 42 Vice President of IMH and Senior Vice
President, Operations, of ICIFC and
IWLG
James Walsh+........................ 45 Director of IMH
Frank P. Filipps+................... 48 Director of IMH
Stephan R. Peers+................... 43 Director of IMH

- --------
+Unaffiliated Director

H. WAYNE SNAVELY has been the Chairman of the Board of IMH since its
formation. He has been Chairman of the Board and Chief Executive Officer of
ICII since December 1991. Mr. Snavely is also Chairman of the Board of ICAI,
the Manager. He has been a Director of Imperial Bancorp and Imperial Bank
since 1993, and was also a director of Imperial Bank from 1975 to 1983. From
1983 to February 1991, Mr. Snavely served as Executive Vice President of
Imperial Bancorp and Imperial Bank with direct management responsibility for
the following bank subsidiaries and divisions: Imperial Bank Mortgage,
Southern Pacific Thrift and Loan, Imperial Trust Company, Wm. Mason & Company,
Imperial Ventures, Inc. and The Lewis Horwitz Organization. From 1983 through
1986, Mr. Snavely was employed as Chief Financial Officer of Imperial Bancorp
and Imperial Bank.

JOSEPH R. TOMKINSON has been the Vice Chairman of the Board and Chief
Executive Officer of IMH and the Chairman of the Board and Chief Executive
Officer of ICIFC and IWLG since their formation. Mr. Tomkinson is also Vice
Chairman of the Board of ICAI, the Manager. Mr. Tomkinson served as President
of ICII from January 1992 to February 1996 and from 1986 to January 1992 he
was President of Imperial Bank Mortgage, a subsidiary of Imperial Bank, one of
the companies that combined to become ICII in 1992. Mr. Tomkinson has been a
Director of ICII since December 1991. From 1984 to 1986, he was employed as
Executive Vice President of Loan Production for American Mortgage Network, a
privately owned mortgage banker. Mr. Tomkinson brings 21 years of combined
experience in real estate, real estate financing and mortgage banking to the
Company.

WILLIAM S. ASHMORE has been the President and Chief Operating Officer of IMH
and Executive Vice President and a Director of ICIFC and IWLG since their
formation. Mr. Ashmore is also Executive Vice President and a Director of
ICAI, the Manager. From August 1993 to February 1996, he was Executive Vice
President and a Director of Secondary Marketing at ICII, having been its
Senior Vice President of Secondary Marketing since January 1988. From 1985 to
1987, he was Chief Executive Officer and Vice Chairman of the Board of Century
National Mortgage Corporation, a wholesale mortgage banking company. From 1978
to 1985, Mr. Ashmore was the President and co-owner of Independent Homes Real
Estate Company, which evolved in 1980 into a mortgage banking firm that was
sold to Century National Bank in 1985. Mr. Ashmore has over 20 years of
combined experience in real estate, real estate financing and mortgage
banking.

RICHARD J. JOHNSON has been Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of IMH, IWLG, and ICIFC since their formation. In
March of 1996, Mr. Johnson was appointed as a director of ICIFC. From March
1995 to March 1996, Mr. Johnson was the Chief Financial Officer of ICAI, the
Manager. From September 1992 to March 1995, Mr. Johnson was Senior Vice
President and Chief Financial Officer of ICII. From November 1989 to September
1992, Mr. Johnson was Vice President and Controller of ICII. From February
1988 to October 1989, he was Vice President and Chief Financial Officer of
Bayhill Service Corporation, a mortgage banking company, and Vice President of
Capital Savings and Loan, the parent of Bayhill Service Corporation. From
January 1987 to February 1988, Mr. Johnson was Vice President of Finance for
Merrill Lynch Huntoon Paige, Inc., a mortgage banking subsidiary of Merrill
Lynch Capital Markets. Mr. Johnson is a Certified Public Accountant.

MARY C. GLASS has been Vice President of IMH and Senior Vice President,
Operations of ICIFC and IWLG since their formation. From April 1995 through
November 1996, Ms. Glass was the Senior Vice President and Managing Director
of Imperial Capital Markets Group, a division of ICII, and from February 1993
to April 1995, she was Senior Vice President of ICIFC, a division of ICII.
From 1991 through 1993, Ms. Glass acted as a mortgage banking consultant. From
1990 through 1991, she was an Executive Vice President at PriMerit Mortgage
Corporation. From 1988 to 1990, Ms. Glass was the President of SCS Mortgage.
From September 1984 through September 1988, Ms. Glass was Senior Vice
President of Concor Financial Services.

JAMES WALSH has been a Director of the Company since August 1995. Mr. Walsh
is an executive vice president of Walsh Securities, Inc. where he directs
mortgage loan production, sales and securitization. Mr. Walsh was an executive
of Donaldson, Lufkin and Jenrette Securities Corporation from January 1989
through March 1996 where he oversaw residential mortgage securitization,
servicing brokerage and mortgage banking services. From February 1987 to
December 1988, Mr. Walsh was an executive in the mortgage banking department
at Bear Stearns & Company. From December 1985 to February 1987, Mr. Walsh was
a senior banking officer at Carteret Savings Bank.

FRANK P. FILIPPS has been a Director of the Company since August 1995. Mr.
Filipps was elected President of CMAC Investment Corporation and Chairman,
President and Chief Executive Officer of Commonwealth Mortgage Assurance
Company ("CMAC") in January 1995. Mr. Filipps joined CMAC in 1992 as Senior
Vice President and Chief Financial Officer, where he was responsible for the
company's financial, investment and data processing operations, as well as the
legal and human resources functions. In 1994, Mr. Filipps was promoted to
Executive Vice President and Chief Operating Officer for both CMAC Investment
Corporation and CMAC, where his additional responsibilities included the
company's sales, marketing, underwriting and risk management. In 1975, Mr.
Filipps joined American International Group, and from 1989 to 1992, he was
Vice President and Treasurer. Prior to that, he was a Second Vice President
for Chase Manhattan Bank, N.A., in New York.

STEPHAN R. PEERS has been a Director of the Company since October 1995.
Since April 1993, Mr. Peers has been an Executive Vice President of
International Strategic Finance Corporation, Ltd., where he performs corporate
finance services for overseas issuers. From April 1989 to April 1993, Mr.
Peers was a Vice President in corporate finance at Montgomery Securities where
he specialized in financial services institutions. From March 1987 to March
1989, Mr. Peers was a Vice President at The First Boston Corporation in
mortgage finance specializing in mortgage related products. Mr. Peers has
served as a Managing Director of Resource Bancshares Corporation since August
1995.

All directors are elected at each annual meeting of the Company's
stockholders for a term of one year, and hold office until their successors
are elected and qualify. Replacements for vacancies occurring among the
Unaffiliated Directors will be elected by a majority vote of the remaining
Directors, including a majority of the Unaffiliated Directors. All officers
serve at the discretion of the Board of Directors. The Company pays an annual
director's fee to each Unaffiliated Director equal to $20,000 and reimburses
such Directors' costs and expenses for attending Board meetings.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The MGCL permits a Maryland corporation to include in its Charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision, which eliminates such liability to the
maximum extent permitted by the MGCL.

The Charter of the Company authorizes it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. The Bylaws of the Company obligate it, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual
who, while a director of the Company and at the request of the Company, serves
or has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise and who is made a party to the proceeding by
reason of his service in that capacity. The Charter and Bylaws also permit the
Company to indemnify and advance expenses to any person who served a
predecessor of the Company in any of the capacities described above and to any
employee or agent of the Company or a predecessor of the Company.

The MGCL requires a corporation (unless its Charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (a) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (1) was committed in bad faith or (2) was the result of
active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the
Bylaws and (b) a written undertaking by him or on his behalf to repay the
amount paid or reimbursed by the Company if it shall ultimately be determined
that the standard of conduct was not met. The Company has entered into
indemnification agreements with all of its officers and directors which
provide for the indemnification of such officers and directors to the fullest
extent permitted under Maryland law. Insofar as indemnification by the Company
for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Company pursuant to the
indemnity agreements referenced herein or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable.

EXECUTIVE COMPENSATION

From November 20, 1995 to December 31, 1995, none of the executive officers
of the Company earned more than $100,000 in total compensation. However, the
following table contains information on the annual cash compensation to be
paid to the executive officers of the Company for the year ending December 31,
1996 for services rendered.

NAME OF INDIVIDUAL CAPACITIES IN WHICH SERVED CASH COMPENSATION (1)
------------------ -------------------------- ---------------------

Joseph R. Tomkinson Vice Chairman of the Board and Chief Executive $250,000 (2)(3)(4)
Officer of IMH and Chairman of the Board and
Chief Executive Officer of ICIFC and IWLG
William S. Ashmore President and Chief Operating Officer of IMH and $200,000 (2)(3)(4)
Executive Vice President of ICIFC and IWLG
Richard J. Johnson Senior Vice President, Chief Financial Officer, $100,000 (2)(3)
Treasurer and Secretary of IMH, ICIFC and IWLG
Mary C. Glass Vice President of IMH and Senior Vice-President, $ 90,000 (2)(3)
Operations, of ICIFC and IWLG

- --------
(1) Pursuant to the Management Agreement, the Company will reserve up to 1/5
of the Company's 25% Incentive Payment (see "Imperial Credit Advisors,
Inc.--The Management Agreement--Management Fees") for distribution as
bonuses to its employees in amounts to be determined by the Company's
Board of Directors. Such payment shall be made in lieu of payment of a
like amount to the Manager under the Management Agreement.
(2) On November 20, 1995, each of the persons in the above table entered into
a five-year employment agreement at an annual salary as stated in the
table, subject to adjustment for inflation, plus bonuses described in
footnote (3) and in the case of Messrs. Tomkinson and Ashmore those
additional bonuses described in footnote (4).
(3) Each of the persons in the above table is entitled to be paid a quarterly
bonus equal to the aggregate dividend such person would have received from
the Company on all shares of Common Stock underlying unexercised stock
options held by such person which were outstanding as of the date of the
Initial Public Offering and on the date of payment of said bonus, provided
however that (i) quarterly bonuses will be paid for each of the first
three quarters of calendar 1996 only if the dividend that would be payable
by the Company on shares of its Common Stock for the subject quarter after
payment of all such quarterly bonuses equals or exceeds ten percent (10%)
(on an annualized basis) of $13.00, (ii) quarterly bonuses will be paid
for the next four calendar quarters thereafter only if the dividend that
would be payable by the Company on shares of its Common Stock for the
subject quarter after payment of all such quarterly bonuses equals or
exceeds fifteen percent (15%) (on an annualized basis) of $13.00 and (iii)
quarterly bonuses will be paid for each calendar quarter thereafter, if
the dividend that would be payable by the Company on shares of its Common
Stock for the subject quarter equals or exceeds such level as determined
by a majority of the Unaffiliated Directors. Such persons will not be
required to refund any portion of such bonuses previously earned
regardless of the level of dividends in subsequent quarters. For the three
months ended March 31, 1996 Messrs. Tomkinson, Ashmore and Johnson and Ms.
Glass received bonuses of $37,050, $19,500, $9,750 and $9,750,
respectively.
(4) Messrs. Tomkinson and Ashmore are each entitled to performance and
profitability bonuses, in no event to exceed their respective base
salaries. For the three months ended March 31, 1996 Messrs. Tomkinson and
Ashmore received bonuses of $73,631 and $29,772.

STOCK OPTIONS

The Company has adopted a Stock Option, Deferred Stock and Restricted Stock
Plan (the "Stock Option Plan"), which provides for the grant of qualified
incentive stock options ("ISOs") that meet the requirements of Section 422 of
the Code, stock options not so qualified ("NQSOs") and deferred stock,
restricted stock, stock

appreciation rights and limited stock appreciation rights awards ("Awards").
The Stock Option Plan is administered by a committee of directors appointed by
the Board of Directors (the "Committee"). ISOs may be granted to the officers
and key employees of the Company. NQSOs and Awards may be granted to the
directors, officers and key employees of the Company or any of its
subsidiaries, to the directors, officers and key employees of the Manager, or
to the Manager itself, and to the directors, officers and key employees of
ICIFC. The exercise price for any option granted under the Stock Option Plan
may not be less than 100% (or 110% in the case of ISOs granted to an employee
who is deemed to own in excess of 10% of the outstanding Common Stock) of the
fair market value of the shares of Common Stock at the time the option is
granted. The purpose of the Stock Option Plan is to provide a means of
performance-based compensation in order to attract and retain qualified
personnel and to provide an incentive to those whose job performance affects
the Company. The effective date of the Stock Option Plan was August 31, 1995.

Subject to anti-dilution provisions for stock splits, stock dividends and
similar events, the Stock Option Plan authorizes the grant of options to
purchase, and Awards of, up to 400,000 shares. If an option granted under the
Stock Option Plan expires or terminates, or an Award is forfeited, the shares
subject to any unexercised portion of such option or Award will again become
available for the issuance of further options or Awards under the Stock Option
Plan. The Company intends to have a proposal on its agenda for its
stockholders' meeting in July 1996 to increase the size of its Stock Option
Plan by 400,000 shares.

Under the Stock Option Plan, the Company may make loans available to stock
option holders, subject to Board of Directors' approval, in connection with
the exercise of stock options granted under the Stock Option Plan. If shares
of Common Stock are pledged as collateral for such indebtedness, such shares
may be returned to the Company in satisfaction of such indebtedness. If so
returned, such shares shall again be available for issuance in connection with
future stock options and Awards under the Stock Option Plan.

Unless previously terminated by the Board of Directors, no options or Awards
may be granted under the Stock Option Plan after August 31, 2005.

Options granted under the Stock Option Plan will become exercisable in
accordance with the terms of the grant made by the Committee. Awards will be
subject to the terms and restrictions of the award made by the Committee. The
Committee has discretionary authority to select participants from among
eligible persons and to determine at the time an option or Award is granted
and, in the case of options, whether it is intended to be an ISO or a NQSO,
and when and in what increments shares covered by the option may be purchased.

Under current law, ISOs may not be granted to any individual who is not also
an officer or employee of the Company. To ensure that IMH qualifies as a REIT,
the Stock Option Plan provides that no options may be granted under the Stock
Option Plan to any person who, assuming exercise of all options held by such
person, would own or be deemed to own more than 9.5% of the outstanding shares
of Common Stock of IMH.

Each option must terminate no more than 10 years from the date it is granted
(or 5 years in the case of ISOs granted to an employee who is deemed to own in
excess of 10% of the combined voting power of the Company's outstanding Common
Stock). Options may be granted on terms providing for exercise in whole or in
part at any time or times during their respective terms, or only in specified
percentages at stated time periods or intervals during the term of the option,
as determined by the Committee.

The exercise price of any option granted under the Stock Option Plan is
payable in full (1) in cash, (2) by surrender of shares of the Company's
Common Stock already owned by the option holder having a market value equal to
the aggregate exercise price of all shares to be purchased including, in the
case of the exercise of NQSOs, restricted stock subject to an Award under the
Stock Option Plan, (3) by cancellation of indebtedness owed by the Company to
the option holder, (4) by a full recourse promissory note executed by the
option holder, or (5) by any combination of the foregoing. The terms of any
promissory note may be changed from time to time by the Board of Directors to
comply with applicable Service or Commission regulations or other relevant
pronouncements.

The Board of Directors may from time to time revise or amend the Stock
Option Plan, and may suspend or discontinue it at any time. However, no such
revision or amendment may impair the rights of any participant under any
outstanding Award without his consent or may, without stockholder approval,
increase the number of shares subject to the Stock Option Plan or decrease the
exercise price of a stock option to less than 100% of fair market value on the
date of grant (with the exception of adjustments resulting from changes in
capitalization), materially modify the class of participants eligible to
receive options or Awards under the Stock Option Plan, materially increase the
benefits accruing to participants under the Stock Option Plan or extend the
maximum option term under the Stock Option Plan.

The following table sets forth the stock options granted to the Company's
current executive officers under the Stock Option Plan as of December 31,
1995:

INDIVIDUAL GRANTS
--------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
NUMBER OF PRICE
SHARES PERCENTAGE APPRECIATION FOR
UNDERLYING OF OPTIONS EXERCISE OPTION TERM (4)
OPTIONS GRANTED TO PRICE EXPIRATION -----------------
NAME GRANTED (1) EMPLOYEES ($/SH) (2) DATE (3) 5%($) 10%($)
- ---- ----------- ---------- ---------- ---------- ------- ---------

Joseph R. Tomkinson..... 95,000 48.7% 11.25 8/30/2005 672,131 1,703,312
William S. Ashmore...... 50,000 25.7 11.25 8/30/2005 353,753 896,480
Richard J. Johnson...... 25,000 12.8 11.25 8/30/2005 176,877 448,240
Mary C. Glass........... 25,000 12.8 11.25 8/30/2005 176,877 448,240

- --------
(1) Such stock options vest 100% on the third anniversary of the date of
grant.
(2) The exercise price for all options equals the fair market value of such
shares at the date of grant as determined by the Committee.
(3) Such stock options expire seven years from the date of vesting or earlier
upon termination of employment.
(4) Amounts reflect assumed rates of appreciation set forth in the
Commission's executive compensation disclosure requirements.

The Company has granted to Messrs. Snavely, Shugerman and Markel, officers
or Directors of the Manager, options to purchase 20,000, 20,000, and 15,000
shares of Common Stock, respectively, at a per share exercise price of $11.25,
which was equal to the fair market value of such shares at the date of grant
as determined by the Committee, with the same terms as the options set forth
above. On the effective date of the Company's Initial Public Offering, the
Company also granted to each of the Unaffiliated Directors options to purchase
15,000 shares of Common Stock at a per share exercise price equal to $13.00,
vesting 100% on the first anniversary of the date of grant.

401(K) PLAN

On the effective date of the Initial Public Offering, the Company commenced
participation in the ICII contributory retirement plan ("401(k) Plan") for all
full time employees with at least six months of service, which is designed to
be tax deferred in accordance with the provisions of Section 401(k) of the
Code. The 401(k) Plan provides that each participant may contribute from 2% to
14% of his or her salary, and the Company will contribute to the participant's
plan account at the end of each plan year 50% of the first 4% of salary
contributed by a participant. Under the 401(k) Plan, employees may elect to
enroll on the first day of any month, provided that they have been employed
for at least six months.

Subject to the rules for maintaining the tax status of the 401(k) Plan, an
additional Company contribution may be made at the discretion of the Company,
as determined by the Unaffiliated Directors. Should a discretionary
contribution be made, the contribution would first be allocated to those
employees deferring salaries in excess of 4%. The matching contribution would
be 50% of any deferral in excess of 4% up to a maximum deferral of 8%. Should
discretionary contribution funds remain following the allocation outlined
above, any remaining Company matching funds would be allocated as a 50% match
of employee contributions, on the first 4% of the employee's deferrals.
Company matching contributions will be made as of December 31st each year. No
contributions for any period presented herein are considered by management to
be material.

IMPERIAL CREDIT ADVISORS, INC.

THE MANAGER

The Manager, ICAI, is a recently formed corporation, which commenced
operations as of January 23, 1995. Prior to November 20, 1995, ICAI had no
prior experience in managing or operating a REIT. Each of the executive
officers of the Manager has significant experience in purchasing, financing,
servicing and investing in mortgage loans and mortgage securities; however,
they have not previously managed a REIT. ICAI is a wholly-owned subsidiary of
ICII.

The Company has elected an outside advisor and in particular an advisor
associated with ICII in order to efficiently and economically coordinate,
assist and manage the duties and responsibilities of the Company. The Company
believes that ICAI is more adequately suited than the Company to provide or
advise it with contract negotiation, market information, implementation of
cost controls, asset/liability modeling and management, servicing systems and
management information systems. In addition, the Company believes that ICAI is
better equipped than the Company to manage human resources and facilities
because ICAI and ICII, with which ICAI has entered into a submanagement
agreement to perform such administrative services for the Company as ICAI
deems necessary, has experienced teams in these areas. The Company believes
that ICAI, as an affiliate of ICII, is particularly appropriate to act as the
Company's advisor because ICAI provides continuity to those businesses
contributed pursuant to the Contribution Transaction and because of ICII's
familiarity with such businesses.

The address of the Manager is 20371 Irvine Avenue, Santa Ana Heights,
California 92707, telephone (714) 474-8500.

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Manager are as follows:

NAME POSITION
---- --------

H. Wayne Snavely* Chairman of the Board
Joseph R. Tomkinson* Vice Chairman of the Board
Thomas O. Markel, Jr. President and Director
William S. Ashmore* Executive Vice President and Director
Stephen Shugerman Executive Vice President
Glenn R. Wilson, Jr. Director

- --------
*Each of these persons also serve as directors or executive officers of the
Company.

For biographical information on Messrs. Snavely, Tomkinson, and Ashmore, see
"Imperial Credit Mortgage Holdings, Inc.--Directors and Executive Officers."

THOMAS O. MARKEL, JR. has been President and a Director of ICAI since March
1995. He has been President and Chief Executive Officer of HomeMac Corporation
since August 1993. Prior to August 1993, he had been Executive Vice President,
Chief Operating Officer and a Director of HomeMac since 1990. Mr. Markel is
also Chairman of the Board, Chief Executive Officer and a Director of
Homeowners' Mortgage Acceptance Corporation, the parent of HomeMac
Corporation, which is currently inactive. Since 1990, Mr. Markel has primarily
been involved in activities related to the analysis, financing and acquisition
of mortgage banking entities and related assets. From March 1986 to March
1990, Mr. Markel was a Senior Vice President of Lepercq Capital Partners,
responsible for capital market activities in the Western United States. Mr.
Markel is a member of the Mortgage Bankers Association Educational and Loan
Administration and Legislative Committees.

STEPHEN SHUGERMAN has been Executive Vice President of ICAI since August
1995 and was a Director of ICAI from August 1995 through October 1995. Mr.
Shugerman has been a Director of ICII since December 1991 and has been
President of SPTL since June 1987. From June 1985 to May 1987, Mr. Shugerman
was President

of ATI Thrift & Loan Association, a privately owned thrift and loan
association, and, from 1979 to 1985, he was Senior Vice President of Imperial
Thrift and Loan Association, a former subsidiary of Imperial Bank.
Mr. Shugerman has recently served as president of the California Association
of Thrift & Loan Companies.

GLENN R. WILSON, JR. has been a Director of ICAI since October 1995. He has
been Chairman since May 1995, and President and Chief Executive Officer of
Knutson Mortgage Corporation since June 1988. From February 1987 to June 1988,
Mr. Wilson served as President and Chief Executive Officer of FirsTier
Mortgage Company. From May 1985 through February 1987, Mr. Wilson served as
President of the Government National Mortgage Association. Mr. Wilson has
served on the Board of Governors of the Mortgage Bankers Association of
America since March 1993.

MANAGEMENT AGREEMENT

The Company has entered into a Management Agreement with the Manager
effective on November 20, 1995, for an initial term of one year. Successive
extensions, each for a period not to exceed one year, may be made by agreement
between the Company and the Manager. The Management Agreement may be
terminated by the Company or the Manager without cause at any time upon 60
days' written notice. Any such termination or failure to extend by the Company
without cause shall result in the payment of a termination or non-renewal fee
to the Manager determined by an independent appraisal. In addition, the
Company and the Manager will have the right to terminate the Management
Agreement upon the occurrence of certain specified events, including a breach
by the other party of any provision contained in the Management Agreement
which remains uncured for 30 days. The Company may renew or terminate the
Management Agreement by a majority vote of its Unaffiliated Directors or by a
vote of the holders of a majority of the outstanding shares of Common Stock.
The Manager may terminate the Management Agreement by a majority vote of its
Board of Directors.

Since November 20, 1995 ICIFC has conducted its Conduit Operations under
substantially identical principles, practices and policies employed when it
was a subsidiary of ICII. The Manager oversees the operations of ICIFC to
ensure that such principles, practices and policies are employed and followed.

The terms of the Management Agreement, including the management fees, were
determined by arms-length discussion based upon what management of both ICAI
and IMH believe are comparable with other advisory relationships and have been
approved by the Board of Directors of ICAI and the Unaffiliated Directors of
IMH. IMH's Bylaws provide that the Unaffiliated Directors shall determine at
least annually that the compensation paid to the Manager is reasonable in
relation to the nature and quality of the services performed by the Manager.

The Manager is at all times be subject to the supervision of the Company's
Board of Directors and provides advisory services to the Company in accordance
with the terms of the Management Agreement. The Manager is involved in three
primary activities: (1) capital management--primarily the oversight of the
Company's structuring, analysis, capital raising and investor relations
activities; (2) asset management--primarily the analysis and oversight of the
acquisition, management and disposition of Company assets; and (3) operations
management--primarily the oversight of IMH's operating subsidiaries.
Specifically, the Manager performs such services and activities relating to
the assets and operations of the Company as may be appropriate, including:

(1) serving as the Company's consultant with respect to formulation of
investment criteria by its Board of Directors;

(2) advising as to the issuance of commitments on behalf of the Company
to purchase mortgage loans or purchasing mortgage loans and Agency
Certificates meeting the investment criteria set from time to time by the
Company's Board of Directors;

(3) advising the Company in connection with and assisting in its Long-
Term Investment Operations;

(4) furnishing reports and statistical and economic research to the
Company regarding the Company's activities and the services performed for
the Company by the Manager;

(5) monitoring and providing to the Board of Directors on an on-going
basis price information and other data, obtained from certain nationally-
recognized dealers who maintain markets in mortgage loans identified by the
Board of Directors from time to time, and providing data and advice to the
Board of Directors in connection with the identification of such dealers;

(6) providing the executive and administrative personnel, office space
and services required in rendering services to the Company;

(7) overseeing the day-to-day operations of IMH and supervising the
performance of such other administrative functions necessary in the
management of IMH as directed by the Board of Directors of IMH;

(8) advising on the negotiation of agreements on behalf of the Company
with banking institutions and other lenders to provide for the short-term
borrowing of funds by the Company;

(9) communicating on behalf of the Company with the holders of the equity
and debt securities of the Company as required to satisfy the reporting and
other requirements of any governmental bodies or agencies and to maintain
effective relations with such holders;

(10) subject to an agreement executed by the Company, advising as to the
designation of a servicer for those loans sold by ICIFC whereby ICIFC
elected not to service such loans;

(11) counseling the Company in connection with policy decisions to be
made by its Board of Directors; and

(12) upon request by and in accordance with the direction of the Board of
Directors of the Company, investing or reinvesting any money of the
Company.

The Manager has entered into a submanagement agreement with ICII to perform
such administrative services for the Company as the Manager deems necessary.
The Manager may enter into additional contracts with other parties, including
ICII, to provide any such services for the Manager, which third party shall be
approved by the Company's Board of Directors.

As of March 31, 1996, ICAI had a total of nine officers and directors
dedicated to the oversight of the Company's operations.

MANAGEMENT FEES

The Manager is entitled to receive a per annum base management fee payable
monthly in arrears of an amount equal to (1) 3/8 of 1% of Gross Mortgage
Assets of IMH composed of other than Agency Certificates, conforming mortgage
loans or mortgage-backed securities secured by or representing interests in
conforming mortgage loans, plus (2) 1/8 of 1% of the remainder of Gross
Mortgage Assets of IMH plus (3) 1/5 of 1% of the average daily asset balance
of the outstanding amounts under IWLG's warehouse lending facilities. The term
"Gross Mortgage Assets" means for any month the weighted average book value of
the Mortgage Assets, before accumulated depreciation or bad debts or other
similar noncash allowances, computed at the end of such month. For the three
months ended March 31, 1996 and for the year ended December 31, 1995, the
Manager earned $426,000 and $38,000 in management fees, respectively.

The Manager is entitled to receive as incentive compensation for each fiscal
quarter, an amount equal to 25% of the Net Income of the Company, before
deduction of such incentive compensation, in excess of the amount that would
produce an annualized Return on Equity equal to the Ten Year U.S. Treasury
Rate plus 2%. The term "Return on Equity" is calculated for any quarter by
dividing the Company's Net Income for the quarter by its Average Net Worth for
the quarter. For such calculations, the "Net Income" of the Company means the
income of the Company determined in accordance with GAAP before the Manager's
incentive compensation, the deduction for dividends paid and any net operating
loss deductions arising from losses in prior periods. A deduction for all of
the Company's interest expenses for borrowed money is also taken in
calculating Net Income. "Average Net Worth" for any period means the
arithmetic average of the sum of the gross proceeds

from any offering of its equity securities by the Company, before deducting
any underwriting discounts and commissions and other expenses and costs
relating to the offering, plus the Company's retained earnings (without taking
into account any losses incurred in prior periods) computed by taking the
daily average of such values during such period. The definition "Return on
Equity" is only for purposes of calculating the incentive compensation
payable, and is not related to the actual distributions received by
stockholders. The 25% Incentive Payment to the Manager will be calculated
quarterly in arrears before any income distributions are made to stockholders
for the corresponding period. For the three months ended March 31, 1996 and
for the year ended December 31, 1995, the Manager earned $129,000 and zero,
respectively, for the Manager's Incentive Payment.

Pursuant to the Management Agreement, the Company will reserve up to 1/5 of
the Company's 25% Incentive Payment for distribution as bonuses to its
employees in amounts to be determined by the Company's Board of Directors.
Such payment shall be made in lieu of payment of a like amount to the Manager
under the Management Agreement.

The Manager's base and incentive fees are calculated by the Manager within
60 days after the end of each calendar quarter, with the exception of the
fourth quarter for which compensation will be computed within 30 days, and
such calculation shall be promptly delivered to the Company. The Company is
obligated to pay the base fee within 90 days after the end of each calendar
quarter.

EXPENSES

Pursuant to the Management Agreement, the Company also pays all operating
expenses except those specifically required to be borne by the Manager under
the Management Agreement. The operating expenses generally required to be
borne by the Manager include the compensation and other employment costs of
the Manager's officers in their capacities as such and the cost of office
space and out-of-pocket costs, equipment and other personnel required for
oversight of the Company's operations. The expenses that will be paid by the
Company will include issuance and transaction costs incident to the
acquisition, disposition and financing of investments, regular legal and
auditing fees and expenses of the Company, the fees and expenses of the
Company's Directors, premiums for directors' and officers' liability
insurance, premiums for fidelity and errors and omissions insurance, servicing
and sub-servicing expenses, the costs of printing and mailing proxies and
reports to stockholders, and the fees and expenses of the Company's custodian
and transfer agent, if any. Reimbursements of expenses incurred by the Manager
which are the responsibility of the Company are made monthly. For the three
months ended March 31, 1996 and for the year ended December 31, 1995, there
were no monies paid to the Manager as reimbursement of expenses.

STOCK OPTION PLAN

The Company has adopted the Stock Option Plan and the Manager and the
directors, officers and employees of the Manager have been granted certain
options or rights under the Stock Option Plan, and may in the future be
granted additional options or rights under the Stock Option Plan. See
"Imperial Credit Mortgage Holdings, Inc.--Stock Options."

LIMITS OF RESPONSIBILITY

Pursuant to the Management Agreement, the Manager does not assume any
responsibility other than to render the services called for thereunder and is
not responsible for any action of the Company's Board of Directors in
following or declining to follow its advice or recommendations. The Manager,
its directors, officers, shareholders and employees, reliable to the Company,
any mortgage security issuer, any subsidiary of the Company, the Unaffiliated
Directors, the Company's stockholders or any subsidiary's shareholders for
acts performed in accordance with and pursuant to the Management Agreement,
except by reason of acts or omissions constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties under the
Management Agreement. The Manager is a recently formed company and does not
have significant assets. Consequently, there can be no assurance that the
Company would be able to recover any damages for claims it may have against
the Manager. The Company has agreed to indemnify the Manager, and its
directors, officers,

shareholders and employees with respect to all expenses, losses, damages,
liabilities, demands, charges and claims arising from any acts or omissions of
the Manager made in good faith in the performance of its duties under the
Management Agreement. See "Risk Factors--Relationship with ICII and its
Affiliates; Conflicts of Interest."

RELATIONSHIPS WITH AFFILIATES

ICII is a publicly traded company whose shares of common stock are listed on
the Nasdaq National Market. ICAI, a wholly-owned subsidiary of ICII, is the
Manager and provides advisory services to the Company in accordance with the
terms of the Management Agreement. As previously described, the Company
utilizes the mortgage banking experience, management expertise and resources
of ICII and ICAI in conducting its business. At May 15, 1996, ICII and SPTL,
its wholly owned subsidiary, owned in the aggregate 10.0% of the Common Stock
of the Company. In addition, a number of Directors and officers of the Company
and ICIFC also serve as Directors and/or officers of ICII and ICAI. See
"Imperial Credit Mortgage Holdings, Inc." and "Imperial Credit Advisors, Inc."
The Company currently utilizes ICII as a resource for loan servicing,
technology, information services, human resources services, management
information services and accounting. However, the amount of services provided
by ICII are expected to decrease as the Company takes on certain of these
responsibilities. As of March 31, 1996 ICII owned all of the voting common
stock and a 1% economic interest in ICIFC, and IMH owned all of the non-voting
preferred stock of ICIFC, representing 99% of the economic interest in ICIFC.
ICII has the power to elect all of the directors of ICIFC and the ability to
control the outcome of all matters for which the consent of the holders of the
common stock of ICIFC is required.

With a view toward protecting the interests of the Company's stockholders,
the Charter and the Bylaws of the Company provide that a majority of the Board
of Directors (and a majority of each committee of the Board of Directors) must
not be "Affiliates" of ICAI, as that term is defined in the Bylaws, and that
the investment policies of the Company must be reviewed annually by a majority
of the Unaffiliated Directors. Moreover, approval, renewal or termination of
the Management Agreement requires the affirmative vote of a majority of the
Unaffiliated Directors. The Management Agreement may be terminated by either
the Company or the Manager upon 60 days' notice. Any such termination or
failure to extend by the Company without cause shall result in the payment of
a termination or non-renewal fee to the Manager determined by an independent
appraisal. In addition, any transaction between the Company and any Affiliated
Person requires the affirmative vote of a majority of the Unaffiliated
Directors.

Certain activities of ICII and its affiliates may adversely affect the
Company's operations. For a further description of such activities and the
possible effects to the Company therefrom, including the terms and conditions
of the Non-Compete Agreement and the Right of First Refusal Agreement, see
"Certain Transactions--The Contribution Transaction" and "--Relationship with
ICII and its Affiliates; Conflicts of Interest."

CERTAIN TRANSACTIONS

THE CONTRIBUTION TRANSACTION

On November 20, 1995, ICII contributed to ICIFC certain of the operating
assets and certain customer lists of ICII's mortgage conduit operations
including all of ICII's mortgage conduit operations' commitments to purchase
mortgage loans subject to rate locks from correspondents (having a principal
balance of $44.3 million at November 20, 1995), in exchange for shares
representing 100% of the common stock and 100% of the outstanding non-voting
preferred stock of ICIFC. Simultaneously, on November 20, 1995, in exchange
for 500,000 shares of Common Stock, ICII (1) contributed to IMH all of the
outstanding non-voting preferred stock of ICIFC, which represents 99% of the
economic interest in ICIFC, (2) caused SPTL to contribute to IMH certain of
the operating assets and certain customer lists of SPTL's warehouse lending
division, and (3) executed the Non-Compete Agreement and the Right of First
Refusal Agreement, each having a term of two years from

November 20, 1995. Of the 500,000 shares issued pursuant to the Contribution
Transaction, 450,000 shares were issued to ICII and 50,000 shares were issued
to SPTL. All of the outstanding shares of common stock of ICIFC were retained
by ICII. Lastly, IMH contributed all of the aforementioned operating assets of
SPTL's warehouse lending operations contributed to it by SPTL to IWLG in
exchange for shares representing 100% of the common stock of IWLG thereby
forming it as a wholly owned subsidiary. At November 20, 1995, the net
tangible book value of the assets contributed pursuant to the Contribution
Transaction was $525,000. ICII and SPTL retained all other assets and
liabilities related to the contributed operations which at November 20, 1995
consisted mostly of $11.7 million of MSRs, $22.4 million of finance
receivables and $26.6 million in advances made by ICII and SPTL to fund
mortgage conduit loan acquisitions and to fund finance receivables,
respectively.

Pursuant to the Non-Compete Agreement, ICII, except as set forth below, and
any 25% entity may not compete with the Warehouse Lending Operations and may
not establish a network of third party correspondent loan originators or
another end-investor in non-conforming mortgage loans. ICII has also agreed
(1) that, in addition to any other remedy that may be available to the
Company, it will sell all of the outstanding shares of common stock of ICIFC
retained by ICII pursuant to the Contribution Transaction to any third party
reasonably acceptable to the Company in the event that ICII or a 25% entity
establishes a network of third party correspondent loan originators during the
term of the Non-Compete Agreement and (2) that any sale by ICIFC of shares of
its capital stock or sale or transfer by ICII of any shares of the common
stock of ICIFC which ICII owns may only be made to a party reasonably
acceptable to the Company. Pursuant to the Non-Compete Agreement, SPTL may
continue to act as an end-investor in non-conforming mortgage loans and
Southern Pacific Funding Corporation, a wholly-owned subsidiary of ICII, may
continue its business, which is primarily to act as a wholesale originator and
bulk purchaser of non-conforming mortgage loans. Pursuant to the Right of
First Refusal Agreement, ICII has granted ICIFC a right of first refusal to
purchase all non-conforming mortgage loans that ICII or any 25% entity
originates or acquires and subsequently offers for sale and ICIFC has granted
ICII, or any 25% entity designated by ICII, a right of first refusal to
purchase all conforming mortgage loans that ICIFC acquires and subsequently
offers for sale.

ARRANGEMENTS AND TRANSACTIONS WITH ICII

The Company and ICII have entered into agreements for the purpose of
defining their ongoing relationships. These agreements have been developed in
the context of a parent/subsidiary relationship and therefore are not the
result of arms length negotiations between independent parties. It is the
intention of the Company and ICII that such agreements and the transactions
provided for therein, taken as a whole, are fair to both parties, while
continuing certain mutually beneficial arrangements. However, there can be no
assurance that each of such agreements, or the transactions provided for
therein, have been effected on terms at least as favorable to the Company as
could have been obtained from unaffiliated third parties.

The Company has entered into a sublease with ICII to lease a portion of its
facilities as the Company's executive offices and administrative facilities.
The Company believes that the terms of the sublease are at least as favorable
as could have been obtained from an unaffiliated third party. For the three
months ended March 31, 1996 and for the year ended December 31, 1995, $38,700
and $12,900, respectively, were paid by the Company to ICII under the
sublease. See "Business--Facilities."

Additional or modified arrangements and transactions may be entered into by
the Company, ICII, and their respective subsidiaries, in the future. Any such
future arrangements and transactions will be determined through negotiation
between the Company and ICII, and it is possible that conflicts of interest
will be involved. The Unaffiliated Directors, consisting of directors
independent of the Company, any manager of the Company (including ICAI) and
ICII and its Affiliated Persons, must independently approve all transactions
by and between the Company and ICII.

The following is a summary of certain arrangements and transactions between
the Company and ICII.

TAX AGREEMENT

IMH has entered into an agreement (the "Tax Agreement") effective November
20, 1995 with ICII for the purposes of (1) providing for filing certain tax
returns, (2) allocating certain tax liability and (3) establishing procedures
for certain audits and contests of tax liability.

Under the Tax Agreement, ICII has agreed to indemnify and hold IMH harmless
from any tax liability attributable to periods ending on or before November
20, 1995, in excess of such taxes as IMH has already paid or provided for. For
periods ending after November 20, 1995, IMH will pay its tax liability
directly to the appropriate taxing authorities. To the extent (1) there are
audit adjustments that result in a tax detriment to IMH or (2) IMH incurs
losses that are carried back to an earlier year and any such adjustment
described in (1) or loss described in (2) results in a tax benefit to ICII or
its affiliates, then ICII will pay to IMH an amount equal to the tax benefit
as that benefit is realized. ICII will also agree to indemnify IMH for any
liability associated with the contribution of the preferred stock of ICIFC and
certain operational assets of SPTL's warehouse lending division or any
liability arising out of the filing of a federal consolidated return by ICII
or any return filed with any state or local counterpart liability. To the
extent there are audit adjustments that result in any tax detriment to ICII or
any of its affiliates with respect to any period ending on or before November
20, 1995, as a result thereof, IMH for any taxable period after November 20,
1995 realizes a tax benefit, then IMH shall pay to ICII the amount of such
benefit at such time or times as IMH actually realizes such benefit.

ICII generally controls audits and administrative and judicial proceedings
with respect to periods ending on or before November 20, 1995, although ICII
cannot compromise or settle any issue that increases IMH's liability without
first obtaining the consent of IMH. IMH generally controls all other audits
and administrative and judicial proceedings.

SERVICES AGREEMENT

Prior to November 20, 1995, the predecessors of ICIFC and IWLG were
historically allocated expenses of various administrative services provided by
ICII. The costs of such services were not directly attributable to a specific
division or subsidiary and primarily included general corporate overhead, such
as accounting and cash management services, human resources and other
administrative functions. These expenses were calculated as a pro rata share
of certain administrative costs based on relative assets and liabilities of
the division or subsidiary, which management believed was a reasonable method
of allocation. The allocations of expenses for the period January 1, 1995 to
November 19, 1995, the three months ended March 31, 1995, and for the years
ended December 31, 1994 and 1993 were $269,000, $75,000, $517,000, and
$459,000, respectively.

The Company and ICII have entered into a services agreement effective as of
November 20, 1995 (the "Services Agreement") under which ICII provides various
services to the Company, including data processing, human resource
administration, general ledger accounts, check processing and payment of
accounts payable. ICII charges fees for each of the services which it provides
under the Services Agreement based upon usage. The Services Agreement has an
initial term that ends on December 31, 1996 and is renewable annually
thereafter. The Company may terminate the Services Agreement, in whole or in
part, upon one month's written notice. As part of the services to be provided
under the Services Agreement, ICII provides the Company with insurance
coverage and self insurance programs, including health insurance. The charge
to the Company for coverage will be based upon a pro rata portion of the costs
to ICII for the various policies. Management believes that the terms of the
Services Agreement are as favorable to the Company as could be obtained from
independent third parties. For the three months ended March 31, 1996 and for
the Interim Period, total expenses allocated to the Company related to these
services were $114,000 and $29,000, respectively.

LOAN PURCHASE AND ADMINISTRATIVE SERVICES AGREEMENT

To facilitate the acquisition of mortgage loans and to monitor loans not
serviced by ICIFC, the Company entered into an agreement (the "Loan Purchase
and Administrative Services Agreement") with ICIFC effective as of November
20, 1995.

To assure a source of mortgage loans for the Long-Term Investment
Operations, ICIFC granted the Company an option to purchase all non-conforming
mortgage loans meeting the Company's investment criteria and policies.
Commitments to acquire loans will obligate the Company to purchase such loans
from ICIFC upon the closing and funding of the loans, pursuant to the terms
and conditions specified in the commitment. Commitment fees to be paid by
ICIFC in connection with the loans purchased by the Company shall be
determined based on criteria established from time to time by ICIFC's Board of
Directors, including a majority of the Unaffiliated Directors, at amounts
which, in its judgment, are comparable to commitment fees then generally paid
by other mortgage loan originators for loans of similar size and credit
characteristics to those being acquired.

In the event that a commitment expires or is canceled because the underlying
loan does not close, ICIFC may renegotiate and the Company may agree to
purchase a new loan with the borrower. As to each renegotiated loan, ICIFC,
after deducting its customary expenses for such loan, shall reduce the price
of such loan sold to the Company by 50% of the excess, if any, of (i) the
Company's then current effective price for a similar mortgage loan with an
identical interest rate at the time of the renegotiation over (ii) ICIFC's
realized price from the borrower for such mortgage loan. ICIFC will furnish
reports to the Company on a periodic basis with respect to the calculation and
amounts of such differentials retained by ICIFC.

To provide additional protection for the Company's investments, ICIFC
monitors and administers the servicing of the Company's mortgage loans which
it is not then servicing, other than loans pooled to secure the issuance of
mortgage-backed securities. Such monitoring and administrative services
include, but are not limited to, the following activities: serving as the
Company's consultant with respect to the servicing of loans; collection of
information and submission of reports pertaining to the mortgage loans and to
monies remitted to ICIFC or the Company by servicers; periodic review and
evaluation of the performance of each servicer to determine its compliance
with the terms and conditions of each servicing agreement and, if deemed
appropriate, recommending to the Company the termination of such servicing
agreement; acting as a liaison between servicers and the Company and working
with servicers to the extent necessary to improve their servicing performance;
review of and recommendations as to fire losses, easement problems and
condemnation, delinquency and foreclosure procedures with regard to the
mortgage loans; review of servicers' delinquency, foreclosure and other
reports on mortgage loans; supervising claims filed under any mortgage
insurance policies; enforcing the obligation of any servicer to repurchase
mortgage loans from the Company; and coordinating and overseeing the
performance of the servicing of the mortgage loans by the servicers to ensure
that the mortgage loans meet the Company's eligibility requirements.

Under the terms of the Loan Purchase and Administrative Services Agreement,
ICIFC advances and remits to the Company any payment of principal and interest
and any principal prepayments which another servicer fails to advance or remit
on a timely basis, excluding certain nonrecoverable advances. In addition, if
a servicer defaults in the performance of its servicing duties or, with the
consent of the Company, assigns such duties to the Company, ICIFC assumes the
servicing function of that servicer and all responsibilities set forth in the
related servicing agreement, for the same fee the servicer was receiving at
the time of such default.

Pursuant to the terms of the Loan Purchase and Administrative Services
Agreement, ICIFC receives a monthly administrative services fee equal to 0.02%
of the outstanding principal balance, as of the last day of the month for
which the fee is paid, of the mortgage loans monitored and administered under
the agreement on which principal and interest remittances for such month have
been made in full to the Company. Additionally, ICIFC is paid for services
rendered under any master servicing agreement which it may enter into with the
Company or any subsidiary of the Company that has issued CMOs or other
mortgage collateralized debt, an amount equal to 0.02% of the average CMO
assets for each fiscal quarter. For the three months ended March 31, 1996 and
the year ended December 31, 1995, no fees associated with the Loan Purchase
and Administrative Service Agreement were paid or earned.

The Loan Purchase and Administrative Services Agreement remains in force
until one year after the effective date of the Initial Public Offering and
thereafter it will be automatically renewed unless written notice

is delivered by either the Company or ICIFC 30 days prior to the end of the
term or any renewal term of the agreement.

The Company may terminate the Loan Purchase and Administrative Services
Agreement upon 30 days' notice following the happening of one or more events
specified in the agreement. Such events relate generally to ICIFC's proper and
timely performance of its duties and obligations under the agreement. In
addition, either party may terminate the Loan Purchase and Administrative
Services Agreement without cause upon 30 days' notice.

OTHER TRANSACTIONS

MANAGEMENT AND SUB-SERVICING AGREEMENTS

ICAI, a wholly-owned subsidiary of ICII, oversees the day-to-day operations
of the Company, subject to the supervision of the Company's Board of
Directors, pursuant to the Management Agreement which became effective on
November 20, 1995. For a description of the terms of the Management Agreement,
see "Imperial Credit Advisors, Inc.--Management Agreement."

ICIFC acts as a servicer of mortgage loans acquired on a servicing released
basis by the Company in its Long-Term Investment Operations pursuant to the
terms of a Servicing Agreement which became effective on November 20, 1995.
For a general description of the terms of such a Servicing Agreement, see
"Business-- Servicing and Master Servicing." ICIFC subcontracts all of its
servicing obligations under such loans to ICII pursuant to a sub-servicing
agreement. The Company believes that the terms of such agreement are
comparable to industry standards. In the first quarter of 1996, ICII
contracted to sell substantially all of its mortgage servicing portfolio and
eliminate a substantial portion of its mortgage servicing department. In
response to ICII's decision to exit the mortgage servicing business, ICIFC is
in the process of negotiations with another third party sub-servicer. ICIFC
expects that the transfer of servicing responsibilities will take place in
June 1996. However, there are no assurances that ICIFC will be able to
complete the transfer by this date.

BULK MORTGAGE LOAN PURCHASES

During the three months ended March 31, 1996, ICIFC purchased from ICII bulk
mortgage loans packages of 30-year fully amortizing six-month adjustable LIBOR
and 30- and 15-year fixed rate first and second trust deed mortgages having a
principal balance of $164.2 million with net premiums paid of $1.9 million.
Servicing rights on all mortgage loans were released to ICIFC.

On December 5, 1995 and December 13, 1995, ICIFC purchased from ICII two
bulk mortgage loan packages of 30-year fully amortizing six-month adjustable
LIBOR and one-year adjustable Treasury Bill rate loans and 30- and 15-year
fixed rate second trust deed mortgages with servicing rights on all mortgage
loans released to ICIFC. The principal balances of the mortgages at the time
of purchase was $172.9 million, with net premiums paid of $3.7 million.

On December 29, 1995, ICIFC purchased from SPTL two bulk mortgage loan
packages of 30-year fully amortizing six-month adjustable LIBOR, one-year
adjustable Treasury Bill rate loans and 30- and 15-year fixed rate fully
amortizing mortgage loans. The principal balances of the loans in the
servicing released and servicing retained bulk packages, respectively, at the
time of purchase was $328.5 million with net premiums paid of $3.5 million.

ICIFC had a 90 day recourse period from the dates of the purchase from ICII
and SPTL for any loan(s) that were 30 to 60 day delinquent and/or lead to
foreclosure. In this case, ICII or SPTL will repurchase the loans from ICIFC
within 15 days of written notice from ICIFC. As to loans that do not have a
prepayment penalty that pay off within the first six months of purchase, ICII
and SPTL will reimburse ICIFC the premium paid at purchase. ICIFC had 60 days
from the date of purchases to complete its due diligence. Any loan that was
found

by ICIFC during this period to not comply with ICIFC's underwriting
guidelines, unless an exception is approved by ICIFC, is subject to repurchase
by ICII and SPTL. ICII and SPTL will repurchase the loan(s) within 15 days of
written notice from ICIFC and reimburse ICIFC any fee paid at purchase.

PURCHASE OF MORTGAGE-BACKED SECURITIES

On December 29, 1995, the Company purchased from SPTL DLJ Mortgage
Acceptance Corp. Pass-Through Certificates Series 1995-4, Class B-1 and Class
B-2 issued August 29, 1995. These certificates are backed primarily by a pool
of certain conventional, 11th District Cost of Funds adjustable rate, one-to-
four family, first lien mortgage loans, with terms to maturity of not more
than 30 years. The mortgage loans underlying the certificates were originated
or acquired by ICII. All of the mortgage loans are serviced by ICII in its
capacity as master servicer. The Company purchased Class B-1 certificates
having a current principal balance of $4.8 million and Class B-2 certificates
having a current principal balance of $2.3 million, at a discount of $1.0
million and $0.7 million, respectively. The Class B-1 certificates are "B"
rated and the Class B-2 are "BB" rated. There was no gain or loss recorded by
either party as a result of this transaction.

PURCHASE OF OTHER INVESTMENTS

On December 29, 1995, IMH purchased a subordinated interest in a lease
receivable securitization from Imperial Business Credit, Inc. ("IBC"), a
wholly-owned subsidiary of ICII. The lease receivables underlying the security
were originated by IBC. IMH purchased the subordinated lease receivables at
the present value of estimated cash flows based on a discount rate of 12%
amounting to a purchase price of $8.4 million. As a result of this
transaction, IBC recorded a gain of $164,000. The discount rate used in
determining the purchase price of the asset was confirmed by an independent
third party.

On March 28, 1996, the Company purchased from ICII the beneficial interest
in the Class A Trust Certificate for the Franchise Loan Receivable Trust 1995-
B. The trust is securitized by loans originated by FMAC and secured by the
franchisee's assets for the loan. The purchase price was $2.8 million based
upon a discount rate of 16%.

On March 8, 1996, the Company purchased from ICII $5.0 million of its Senior
Note obligations at a price of $4.5 million plus accrued interest. The
obligations are currently unregistered debt of ICII and cannot be traded or
sold by the Company. ICII has agreed to register the notes under the
Securities Act so the Company has the ability to sell them in the future.

The Company may, from time to time, enter into additional transactions in
the ordinary course of business with institutions with which certain of the
Unaffiliated Directors are employed.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
6,750,000 shares of Common Stock, of which 500,000 shares are "restricted
securities" as that term is defined in Rule 144, which will not become
eligible for sale under Rule 144 until November 20, 1997, at the earliest. As
described below, Rule 144 permits resales of restricted securities subject to
certain restrictions. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated) who beneficially owned shares
for at least two years, including any person who may be deemed an "affiliate"
of the Company, would be entitled to sell within any three-month period a
number of such shares that does not exceed the greater of 1% of the shares of
the Company's Common Stock then outstanding or the average weekly trading
volume in the Company's Common Stock during the four calendar weeks preceding
the date on which notice of the sale is filed with the Commission. A person
who is not deemed to have been an "affiliate" of the Company at any time
during the three months immediately preceding a sale and who has beneficially
owned shares for at least three years would be entitled to sell such shares
under Rule 144 without regard to the volume limitation described above.

ICII, SPTL and certain stockholders, who own in the aggregate 500,000 shares
of Common Stock, and the Company have agreed with the Underwriters that, for a
period of 120 days following the commencement of this Offering, they will not
sell, contract to sell or otherwise dispose of any shares of Common Stock or
rights to acquire such shares (other than pursuant to employee plans or the
DRP) without the prior written consent of PaineWebber Incorporated.

In addition, the Company has outstanding options to purchase 295,000 shares
of Common Stock and has reserved an additional 105,000 shares for grant of
future options under the Stock Option Plan. The Company intends to have a
proposal on its agenda for its stockholders' meeting in July 1996 to increase
the size of its Stock Option Plan by 400,000 shares. The Company intends to
file a Registration Statement on Form S-8 covering the shares that have been
reserved for issuance under the Stock Option Plan, thus permitting the resale
of such shares in the public market after such stock options have been
exercised.

The Company has also adopted the DRP, which will allow stockholders to have
their dividend distributions from the Company automatically reinvested in
additional shares of Common Stock that may be either issued by the Company or
purchased on the open market. To the extent such shares are issued by the
Company, such shares will be registered under the Securities Act, thus
permitting the resale of such shares in the public market. See "Dividend
Reinvestment Plan."

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of May 15,
1996, as adjusted to reflect the sale of Common Stock being offered hereby, by
(1) each person known to the Company to beneficially own more than five
percent of the Company's Common Stock, (2) each Director, (3) the Company's
executive officers, and (4) all Directors and executive officers as a group.
Unless otherwise indicated in the footnotes to the table, the beneficial
owners named have, to the knowledge of the Company, sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws where applicable.

PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES -------------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------ ------------ ---------- ----------

Imperial Credit Industries, Inc. (1).. 374,538 8.8% 5.5%
Southern Pacific Thrift and Loan Asso-
ciation (2).......................... 50,000 1.2% *
H. Wayne Snavely...................... -- -- --
Joseph R. Tomkinson................... -- -- --
William S. Ashmore.................... 1,075 * *
Richard J. Johnson.................... 3,076 * *
Mary C. Glass......................... -- -- --
James Walsh........................... -- -- --
Frank P. Fillips...................... -- -- --
Stephan R. Peers...................... -- -- --
All directors and executive officers
as a group (8 persons)............... 4,151 * *

- --------
* less than 1%

(1) ICII's address is 23550 Hawthorne Boulevard, Building One, Suite 110,
Torrance, California 90505. ICII disclaims beneficial ownership of all
50,000 shares of the Company held by SPTL.

(2) SPTL's address is 12300 Wilshire Boulevard, Los Angeles, California 90025.
SPTL is a wholly-subsidiary of ICII.

DESCRIPTION OF CAPITAL STOCK

The authorized stock of the Company consists of 50,000,000 shares of Common
Stock, $0.01 par value per share, and 10,000,000 shares of Preferred Stock,
$0.01 par value per share. Each share of Common Stock is entitled to
participate equally in dividends when and as declared by the Board of
Directors and in the distribution of assets of the Company upon liquidation.
Each share of Common Stock is entitled to one vote and will be fully paid and
nonassessable by the Company upon issuance. Shares of the Common Stock of the
Company have no preference, conversion, exchange, preemptive or cumulative
voting rights. The authorized stock of the Company may be increased and
altered from time to time as permitted by Maryland law. The Charter authorizes
the Board of Directors to reclassify any unissued shares of its Common Stock
in one or more classes or series.

Meetings of the stockholders of the Company are to be held annually, and
special meetings may be called by the Board of Directors, the Chairman of the
Board, the President, the Vice Chairman or a majority of the Unaffiliated
Directors. The Charter reserves to the Company the right to amend any
provision thereof in the manner prescribed by law.

The Charter authorizes the Board of Directors to issue shares of Preferred
Stock designated in one or more classes or series. The Preferred Stock may be
issued from time to time with such designations, rights and preferences as
shall be determined by the Board of Directors. Preferred Stock would be
available for possible future financing of, or acquisitions by, the Company
and for general corporate purposes without any legal requirement that further
stockholder authorization for issuance be obtained. The issuance of Preferred
Stock could have the effect of making an attempt to gain control of the
Company more difficult by means of a merger, tender offer, proxy contest or
otherwise. The Preferred Stock, if issued, may have a preference on dividend
payments which could affect the ability of the Company to make dividend
distributions to the common stockholders. As of the date hereof no shares of
Preferred Stock have been issued. Certain provisions of the Company's Charter
may also have the effect of delaying, deferring or preventing a change in
control of the Company. See "Certain Provisions of Maryland Law and of the
Company's Charter and Bylaws."

Repurchase of Shares and Restrictions on Transfer. Two of the requirements
of qualification for the tax benefits accorded by the REIT provisions of the
Code are that (1) during the last half of each taxable year not more than 50%
in value of the outstanding shares may be owned, actually or constructively,
by or for five or fewer individuals (as defined in the Code to include certain
entities), and (2) there must be at least 100 stockholders on 335 days of each
taxable year of 12 months.

In order that IMH may meet these requirements at all times, the Charter
prohibits any person, other than ICII, as to the 374,538 shares which it owns
(which excludes the 50,000 shares of Common Stock issued to SPTL pursuant to
the Contribution Transaction, as to which ICII disclaims beneficial
ownership), or groups of persons from acquiring or holding, actually or
constructively, shares of Common Stock in excess of 9.5% (in value or in
number of shares, whichever is more restrictive) of the aggregate of the
outstanding shares of Common Stock. For this purpose, the term "ownership" is
defined in accordance with the REIT provisions of the Code, the constructive
ownership provisions of Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code, and Rule 13d-3 promulgated by the Commission under
the Exchange Act and the term "person" is defined to include a "group," which
is defined to have the same meaning as that term has for purposes of Section
13(d)(3) of the Exchange Act. Accordingly, shares of Common Stock owned or
deemed to be owned by a person who individually owns less than 9.5% of the
shares outstanding may nevertheless be in violation of the ownership
limitations set forth in the Company's Charter.

The constructive ownership provisions applicable under Section 544 of the
Code attribute ownership of securities owned by a corporation, partnership,
estate or trust proportionately to its stockholders, partners or
beneficiaries, attribute ownership of securities owned by family members to
other members of the same family, treat securities with respect to which a
person has an option to purchase as actually owned by that person, and set
forth rules as to when securities constructively owned by a person are
considered to be actually owned for the application of such attribution
provisions (i.e., "reattribution"). For purposes of determining

whether a person holds shares of Common Stock in violation of the ownership
limitations set forth in the Company's Charter, a person or group will thus be
treated as owning not only shares of Common Stock actually or constructively
owned, but also any shares of Common Stock attributed to such person or group
under the attribution rules described above. Ownership of shares of the
Company's Common Stock through such attribution is generally referred to as
constructive ownership.

The Company's Charter further prohibits (a) any person from actually or
constructively owning shares of Common Stock that would result in IMH being
"closely held" under Section 856(h) of the Code or otherwise cause IMH to fail
to qualify as a REIT, and (b) any person from transferring shares of Common
Stock if such transfer would result in shares of Common Stock being owned by
fewer than 100 persons. If any transfer of shares of Common Stock occurs
which, if effective, would result in any person actually or constructively
owning shares of Common Stock in excess or in violation of the above transfer
or ownership limitations, then that number of shares of Common Stock the
actual or constructive ownership of which otherwise would cause such person to
violate such limitations (rounded to the nearest whole share) shall be
automatically transferred to a trustee (the "Trustee") as trustee of a trust
(the "Trust") for the exclusive benefit of one or more charitable
beneficiaries (the "Charitable Beneficiary"), and the intended transferee
shall not acquire any rights in such shares. Shares held by the Trustee shall
be issued and outstanding shares of Common Stock. The intended transferee
shall not benefit economically from ownership of any shares held in the Trust,
shall have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the shares held in the Trust. The Trust shall
have all voting rights and rights to dividends or other distributions with
respect to shares held in the Trust, which rights shall be exercised for the
exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Company that shares of Common
Stock have been transferred to the Trustee shall be paid with respect to such
shares to the Trustee upon demand and any dividend or other distribution
authorized but unpaid shall be paid when due to the Trustee. Any dividends or
distributions so paid over to the Trustee shall be held in trust for the
Charitable Beneficiary. The Board of Directors of the Company may, in their
discretion, waive these requirements on owning shares in excess of the
Ownership Limit.

Within 20 days of receiving notice from the Company that shares of Common
Stock have been transferred to the Trust, the Trustee shall sell the shares
held in the Trust to a person, designated by the Trustee, whose ownership or
the shares will not violate the ownership limitations set forth in the
Company's Charter. Upon such sale, the interest of the Charitable Beneficiary
in the shares sold shall terminate and the Trustee shall distribute the net
proceeds of the sale to the intended transferee and to the Charitable
Beneficiary as follows. The intented transferee shall receive the lesser of
(1) the price paid by the intended tranasferee for the shares or, if the
intended transferee did not give value for the shares in connection with the
event causing the shares to be held in the Trust (e.g., in the case of a gift,
devise or other such transaction), the Market Price (as defined below) of the
shares on the day of the event causing the shares to be held in the Trust and
(2) the price per share received by the Trustee from the sale or other
disposition of the shares held in the Trust. Any net sale proceeds in excess
of the amount payable to the intended transferee shall be immediately paid to
the Charitable Beneficiary. In addition, shares of Common Stock transferred to
the Trustee shall be deemed to have been offered for sale to the Company, or
its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that resulted in such transfer to the Trust (e.g., in
the case of a devise or gift, the Market Price at the time of such devise or
gift) and (ii) the Market Price on the date the Company, or its designee,
accepts such offer. The Company shall have the right to accept such offer
until the Trustee has sold the shares held in the Trust. Upon such a sale to
the Company, the interest of the Charitable Beneficiary in the shares sold
shall terminate and the Trustee shall distribute the net proceeds of the sale
to the intended transferee.

consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such shares are listed or
admitted to trading or, if such shares are not listed or admitted to trading
on any national securities exchange, the last quoted price, or, if not so
quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or, if such system is no longer in use, the
principal other automated quotation system that may then be in use or, if such
shares are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market
in such shares selected by the Board or Directors or, in the event that no
trading price is available for such shares, the fair market value of the
shares, as determined in good faith by the Board of Directors.

Every owner of more than 5% (or such lower percentage as required by the
Code or the regulations promulgated thereunder) of all classes or series of
the Company's stock, including shares of Common Stock, within 30 days after
the end or each taxable year, is required to give written notice to the
Company stating the name and address of such owner, the number of shares of
each class and series of stock of the Company beneficially owned and a
description of the manner in which such shares are held. Each such owner shall
provide to the Company such additional information as the Company may request
in order to determine the effect, if any, of such beneficial ownership on
IMH's status as a REIT and to ensure compliance with the Ownership Limit.

The transfer agent and registrar for the Company's Common Stock is Boston
EquiServe, L.P., North Quincy, Massachusetts.

CERTAIN PROVISIONS OF MARYLAND LAW AND
OF THE COMPANY'S CHARTER AND BYLAWS

The following summary of certain provisions of the MGCL and of the Charter
and the Bylaws of IMH does not purport to be complete and is subject to and
qualified in its entirety by reference to Maryland law and the Charter and the
Bylaws of IMH, copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part. See "Additional Information."

REMOVAL OF DIRECTORS

The Charter provides that a director may be removed at any time but only by
the affirmative vote of at least two-thirds of the votes entitled to be cast
in the election of directors.

BUSINESS COMBINATIONS

Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting
power of the corporation's shares or an affiliate of the corporation who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then outstanding
voting stock of the corporation (an "Interested Stockholder") or an affiliate
of such an Interested Stockholder are prohibited for five years after the most
recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors of such corporation and approved by the affirmative
vote of at least (a) 80% of the votes entitled to be cast by holders of
outstanding shares of voting stock of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in
cash or in the same form as previously paid by the Interested Stockholder for
its shares. These provisions of Maryland law do not apply, however, to
business combinations that are approved or exempted by the board of directors
of the

corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. Since ICII now beneficially owns less than 10.0% of
the Company's voting shares (excluding 50,000 shares of Common Stock issued to
SPTL in the Contribution Transaction as to which ICII disclaims beneficial
ownership), ICII is not subject to the business combination provisions, of the
MGCL. In addition, pursuant to the statute, the Company has exempted any
business combinations involving ICII and, consequently, the five-year
prohibition and the super-majority vote requirements of the statute will not
in any event apply to business combinations between ICII and the Company. As a
result, ICII may be able to enter into business combinations with the Company,
which may not be in the best interest of the stockholders, without compliance
by the Company with the super-majority vote requirements and the other
provisions of the statute.

CONTROL SHARE ACQUISITIONS

The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: (1) one-fifth or more but less than one-third, (2) one-third or more
but less than a majority, or (3) a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control shares, subject
to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses)
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value determined, without regard to
the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquiror or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquiror in the
control share acquisition.

The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.

The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's shares of stock. There can be no assurance that such provision will
not be amended or eliminated at any time in the future.

AMENDMENT TO THE CHARTER

The Company reserves the right from time to time to make any amendment to
its Charter, now or hereafter authorized by law. The Charter may be amended
only by the affirmative vote of the stockholders of not less than majority of
all of the votes entitled to be cast on the matter; provided however,
provisions on removal of directors

may be amended only by the affirmative vote of the holders of not less than
two-thirds of all of the votes entitled to be cast in the election of
directors.

DISSOLUTION OF THE COMPANY

The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than a majority of all of the votes entitled to be
cast on the matter.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws provide that (a) with respect to an annual meeting of
stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(1) pursuant to the Company's notice of the meeting, (2) by the Board of
Directors or (3) by a stockholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws and
(b) with respect to special meetings of stockholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of stockholders and nominations of persons for election to the Board of
Directors may be made only (1) pursuant to the Company's notice of the
meeting, (2) by the Board of Directors or (3) provided that the Board of
Directors has determined that directors shall be elected at such meeting, by a
stockholder who is entitled to vote at the meeting and has complied with the
advance notice provisions set forth in the Bylaws.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE CHARTER
AND BYLAWS

The business combination provisions and, if the applicable provision in the
Bylaws is rescinded, the control share acquisition provisions of the MGCL, the
provisions of the Charter on removal of directors and the advance notice
provisions of the Bylaws could delay, defer or prevent a transaction or a
change in control of the Company that might involve a premium price of holders
of Common Stock or otherwise be in their best interest.

FEDERAL INCOME TAX CONSIDERATIONS

The following summary of material federal income tax considerations
regarding the Company and the offering described herein is based on current
law, is for general information only and is not tax advice. This summary does
not purport to deal with all aspects of taxation that may be relevant to
prospective purchasers of Common Stock in light of such purchasers' particular
investment or tax circumstances, or to certain types of purchasers subject to
special treatment under the federal income tax laws, including insurance
companies, financial institutions, broker-dealers, tax-exempt organizations
(except to the extent discussed under the heading "Taxation of Tax-Exempt
Stockholders"), or foreign corporations and persons who are not citizens or
residents of the United States. In addition, the summary below does not
consider the effect of any foreign, state, local or other tax laws that may be
applicable to prospective purchasers of Common Stock. Unless the context
otherwise requires, references in the summary below to "IMH" refer to IMH and
IWLG, IMH's Qualified REIT Subsidiary, collectively.

PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

TAXATION OF IMH

General. IMH elected to be taxed as a REIT under Sections 856 through 860 of
the Code, commencing with its taxable year ended December 31, 1995. IMH
believes that, commencing with such taxable year, it has been organized and
has operated in such a manner as to qualify for taxation as a REIT under the
Code

commencing with such taxable year, and IMH intends to continue to operate in
such a manner, but no assurance can be given that it has operated or will
continue to operate in such a manner so as to qualify or remain qualified.

These sections of the Code are highly technical and complex. The following
summary sets forth the material aspects of the sections that govern the
federal income tax treatment of a REIT and its stockholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof.

At the closing of the offering described herein, contingent upon the receipt
of certain factual representations from IMH, Latham & Watkins will render its
opinion that, commencing with IMH's taxable year ended December 31, 1995, IMH
was organized in conformity with the requirements for qualification as a REIT,
and its proposed method of operation has enabled and will enable it to meet
the requirements for qualification and taxation as a REIT under the Code. It
must be emphasized that such opinion will be based on various factual
assumptions relating to the organization and operation of IMH and such
representations as to factual matters. In addition, such opinion will be based
upon the factual representations of IMH concerning its business and assets as
set forth in the Prospectus. Moreover, such qualification and taxation as a
REIT depends upon IMH's ability to meet (through actual annual operating
results, distribution levels and diversity of stock owenership) the various
qualification tests imposed under the Code discussed below, the results of
which have not been and will not be reviewed by Latham & Watkins. Accordingly,
no assurance can be given that the actual results of IMH's operation for any
particular taxable year have satisfied or will satisfy such requirements.
Further, the anticipated income tax treatment described in this Prospectus may
be changed, perhaps retroactively, by legislative, administrative or judicial
action at any time. See "Risk Factors--Consequences of Failure to Maintain
REIT Status; Company Subject to Tax as Regular Corporation" and "Failure to
Qualify."

If IMH qualifies for taxation as a REIT, it generally will not be subject to
federal corporate income taxes on its net income that is currently distributed
to stockholders. This treatment substantially eliminates the "double taxation"
(at the corporate and stockholder levels) that generally results from
investment in a regular corporation. However, IMH will be subject to federal
income tax as follows: First, IMH will be taxed at regular corporate rates on
any undistributed REIT taxable income, including undistributed net capital
gains. Second, under certain circumstances, IMH may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if IMH has
(i) net income from the sale or other disposition of foreclosure property
(generally, property acquired at or in lieu of foreclosure of the mortgage
secured by such property or as a result of a default under a lease of such
property) which is held primarily for sale to customers in the ordinary course
of business, or (ii) other nonqualifying income from foreclosure property, it
will be subject to tax at the highest corporate rate on such income. Fourth,
if IMH has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business other than foreclosure property),
such income will be subject to a 100% tax. Fifth, if IMH should fail to
satisfy the 75% gross income test or the 95% gross income test (as discussed
below), but has nonetheless maintained its qualification as a REIT because
certain other requirements have been met, it will be subject to a 100% tax on
an amount equal to (a) the gross income attributable to the greater of the
amount by which IMH fails the 75% or 95% test multiplied by (b) a fraction
intended to reflect IMH's profitability. Sixth, if IMH should fail to
distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior periods,
IMH would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, with respect to
any asset (a "Built-In Gain Asset") acquired by IMH from a corporation which
is or has been a C corporation (i.e., generally a corporation subject to full
corporate-level tax) in a transaction in which the basis of the Built-In Gain
Asset in the hands of IMH is determined by reference to the basis of the asset
in the hands of the C corporation, if IMH recognizes gain on the disposition
of such asset during the ten-year period (the "Recognition Period") beginning
on the date on which such asset was acquired by IMH, then, to the extent of
the Built-In Gain (i.e., the excess of (a) the fair market value of such asset
over (b) IMH's adjusted basis in such asset, determined as of the beginning of
the Recognition Period), such gain will be subject to tax at the highest
regular corporate rate pursuant to Treasury Regulations that have not yet been
promulgated. The results described above with respect to the recognition of
Built-In Gain assume that IMH will make an election pursuant to Notice 88-19
and that such treatment is not modified by certain revenue proposals in the
Administration's 1997 Budget Proposal.

Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees or
directors; (ii) the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest; (iii) which
would be taxable as a domestic corporation, but for Sections 856 through 859
of the Code; (iv) which is neither a financial institution nor an insurance
company subject to certain provisions of the Code; (v) the beneficial
ownership of which is held by 100 or more persons; (vi) during the last half
of each taxable year not more than 50% in value of the outstanding stock of
which is owned, actually or constructively, by or for five or fewer
individuals (as defined in the Code to include certain entities); and (vii)
which meets certain other tests, described below, regarding the nature of its
income and assets. The Code provides that conditions (i) to (iv), inclusive,
must be met during the entire taxable year and that condition (v) must be met
during at least 335 days of a taxable year of twelve months, or during a
proportionate part of a taxable year of less than twelve months.

The Company believes that it has previously issued sufficient shares of
Common Stock with sufficient diversity of ownership to allow IMH to satisfy
conditions (v) and (vi). In addition, the Charter provides for restrictions
regarding the transfer and ownership of shares, which restrictions are
intended to assist IMH in continuing to satisfy the share ownership
requirements described in (v) and (vi) above. Such ownership and transfer
restrictions are described in "Description of Capital Stock--Repurchase of
Shares and Restrictions on Transfer." These restrictions may not ensure that
IMH will, in all cases, be able to satisfy the share ownership requirements
described above. If IMH fails to satisfy such share ownership requirements,
IMH's status as a REIT will terminate. See "--Failure to Qualify."

In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. IMH has a calendar taxable year.

Ownership of IWLG. IMH has owned 100% of the stock of IWLG at all times IWLG
has been in existence. As a result, IWLG will be treated as a "qualified REIT
subsidiary." Code Section 856(i) provides that a corporation which is a
"qualified REIT subsidiary" will not be treated as a separate corporation, and
all assets, liabilities, and items of income, deduction, and credit of a
"qualified REIT subsidiary" will be treated as assets, liabilities and such
items (as the case may be) of the REIT for all purposes of the Code including
the REIT qualification tests. Thus, in applying the requirements described
herein, IWLG will be ignored, and all assets, liabilities and items of income,
deduction and credit of such subsidiary will be treated as assets, liabilities
and such items (as the case may be) of IMH. IWLG, therefore, will not be
subject to federal income tax. In addition, IMH's ownership of the voting
stock of IWLG will not violate the restrictions against ownership of
securities of any one issuer which constitute more than 10% of such issuer's
voting securities or more than 5% of the value of IMH's total assets,
described below under "--Asset Tests."

Income Tests. In order to maintain its qualification as a REIT, IMH annually
must satisfy three gross income requirements. First, at least 75% of IMH's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from: (i) rents from real
property; (ii) interest on obligations secured by mortgages on real property
or on interests in real property; (iii) gain from the sale or other
disposition of real property (including interests in real property and
interests in mortgages on real property) not held primarily for sale to
customers in the ordinary course of business; (iv) dividends or other
distributions on, and gain (other than gain from prohibited transactions) from
the sale or other disposition of, transferable shares in other real estate
investment trusts; (v) abatements and refunds of taxes on real property; (vi)
income and gain derived from foreclosure property; (vii) amounts (other than
amounts the determination of which depend in whole or in part on the income or
profits of any person) received or accrued as consideration for entering into
agreements (a) to make loans secured by mortgages on real property or on
interests in real property or (b) to purchase or lease real property
(including interests in real property and interests in mortgages on real
property); (viii) gain from the sale or other disposition of a real estate
asset which is not a prohibited transaction; and (ix) qualified temporary
investment income. Second, at least 95% of IMH's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
from the sources described above with respect to the 75% gross income test,
dividends, interest, and gain from the sale or disposition of stock or
securities (or from any combination of the foregoing). Third, short-term gain
from the

sale or other disposition of stock or securities, gain from prohibited
transactions, and gain on the sale or other disposition of real property held
for less than four years (apart from involuntary conversions and sales or
other disposition of foreclosure property) must represent less than 30% of
IMH's gross income (including gross income from prohibited transactions) for
each taxable year.

The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.

Generally, if a loan is secured by both personal property and real property,
interest must be allocated between the personal property and the real
property, with only the interest allocable to the real property qualifying as
mortgage interest under the 75% gross income test. Treasury Regulations
provide that if a loan is secured by both personal and real property and the
fair market value of the real property as of the commitment date equals or
exceeds the amount of the loan, the entire interest amount will qualify under
the 75% gross income test. If the amount of the loan exceeds the fair market
value of the real property, the interest income allocated to the real property
is an amount equal to the interest income multiplied by a fraction, the
numerator of which is the fair market value of the real property as of the
commitment date, and the denominator of which is the amount of the loan. The
interest income allocated to the personal property is an amount equal to the
excess of the total interest income over the interest income allocated to the
real property.

Interest earned on mortgage loans, and mortgage-backed securities secured by
or representing an interest in such loans, pursuant to IMH's Long-Term
Investment Operations will qualify as "interest" for purposes of the 95% and
75% gross income tests if such assets are treated as obligations secured by
mortgages on real property or on interests in real property. However, income
attributable to securities (other than Qualified REIT Assets) that IMH holds
directly or through IWLG, dividends on stock (including any dividends IMH
receives from ICIFC), interest on any other obligations not secured by real
property, and gains from the sale or disposition of stock or other securities
that are not Qualified REIT Assets will not qualify under the 75% gross income
test if such income is not treated as interest on obligations secured by
mortgages on real property or on interests in real property or gain from the
sale or other disposition of a Qualified REIT Asset, which is not a prohibited
transaction. Such income will qualify under the 95% gross income test,
however, if such income constitutes interest, dividends or gain from the sale
or disposition of stock or securities. Income from loan guarantee fees,
mortgage servicing contracts or other contracts under which IMH would earn
fees for performing services will not qualify under either the 95% or 75%
gross income tests if such income constitutes fees for services rendered by
IMH or is not treated as interest (on obligations secured by mortgages on real
property or on interests in real property for purposes of the 75% gross income
test). Similarly, income from hedging, including the sale of hedges, will not
qualify under the 75% or 95% gross income tests unless such hedges constitute
Qualified Hedges, in which case such income will qualify under the 95% gross
income test.

Furthermore, ICIFC receives servicing and processing fees and income from
gain on the sale of certain mortgage loans and mortgage securities in
connection with the Conduit Operations. Such fees do not accrue to IMH, but
IMH receives dividends on its nonvoting preferred stock in ICIFC. Such
dividends will qualify under the 95% gross income test, but will not qualify
under the 75% gross income test.

In order to comply with the 95% and 75% gross income tests, IMH has limited
and will continue to limit substantially all of the assets that it acquires to
Qualified REIT Assets. As a result, IMH may limit the type of assets,
including hedging contracts, that it otherwise might acquire and, therefore,
the type of income it otherwise might receive, including income from hedging,
other than income from Qualified Hedges. See "Business--Hedging."

In addition, to comply with the 30% gross income test, IMH may have to hold
mortgage loans and mortgage-backed securities for four or more years and
securities (other than securities that are Qualified REIT Assets) and hedges
for one year or more at times when IMH might otherwise have opted for the
disposition of such assets for short term gains.

In order to comply with the REIT gross income tests, IMH has monitored and
will continue to monitor its income, including income from dividends,
warehouse lending, hedging transactions, futures contracts, servicing and
sales of Mortgage Assets, gains on the sale of securities, and other income
not derived from Qualified REIT Assets. IMH believes that the aggregate amount
of any nonqualifying income in any taxable year has not exceeded and will not
exceed the limit on nonqualifying income under the gross income tests.

If IMH fails to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, it may nevertheless qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if IMH's failure to meet such tests was
due to reasonable cause and not due to willful neglect, IMH attaches a
schedule of the sources of its income to its federal income tax return, and
any incorrect information on the schedule was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all circumstances
IMH would be entitled to the benefit of these relief provisions. For example,
if IMH fails to satisfy the gross income tests because nonqualifying income
that IMH intentionally incurs exceeds the limits on such income, the Internal
Revenue Service (the "Service") could conclude that IMH's failure to satisfy
the tests was not due to reasonable cause. If these relief provisions are
inapplicable to a particular set of circumstances involving IMH, IMH will not
qualify as a REIT. As discussed above in "Federal Income Tax Considerations--
Taxation of IMH--General," even if these relief provisions apply, a tax would
be imposed with respect to the excess net income. There can be no assurance
that IMH will always be able to maintain compliance with the gross income
tests for REIT qualification despite its periodic monitoring procedures. No
similar mitigation provision provides relief if IMH fails the 30% gross income
test. In such case, IMH would cease to qualify as a REIT. See "--Failure to
Qualify.

Any gain realized by IMH on the sale of any property (including mortgage
loans and mortgage-backed securities) held as inventory or other property held
primarily for sale to customers in the ordinary course of business will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. Such prohibited transaction income may also have an adverse
effect upon IMH's ability to satisfy the income tests for qualification as a
REIT. Under existing law, whether property is held as inventory or primarily
for sale to customers in the ordinary course of a trade or business is a
question of fact that depends on all the facts and circumstances with respect
to the particular transaction. ICIFC securitizes mortgage loans and sells the
resulting mortgage securities. See "Business--Conduit Operations--
Securitization and Sale Process." If IMH were to sell such mortgage securities
on a regular basis, there is a substantial risk that such sales would
constitute prohibited transactions and that all of the profits therefrom would
be subject to a 100% tax. Therefore, such sales have been made and will be
made only by ICIFC. ICIFC is not subject to the 100% penalty tax on income
from prohibited transactions, which is only applicable to a REIT.

Asset Tests. IMH, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of IMH's total assets must be represented by Qualified REIT
Assets, cash, cash items and government securities. Qualified REIT Assets
include (i) interests in real property and interests in mortgages on real
property, (ii) interests in REMICs, and (iii) stock or debt instruments held
for not more than one year purchased with the proceeds of a stock offering or
long-term (at least five years) public debt offering of IMH. Second, not more
than 25% of IMH's total assets may be represented by securities other than
those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's securities owned by IMH may not
exceed 5% of the value of IMH's total assets and IMH may not own more than 10%
of any one issuer's outstanding voting securities. IMH believes that
substantially all of its assets, other than the nonvoting preferred stock of
ICIFC, are Qualified REIT Assets.

As described above, IMH will be treated as owning all assets, liabilities
and items of income, deduction, and credit of IWLG, IMH's wholly-owned
Qualified REIT Subsidiary. Pursuant to IWLG's Warehouse Lending Operations,
IWLG provides short-term lines of credit ("warehouse loans") to ICIFC and
approved mortgage banks, most of which are correspondents of ICIFC, to finance
mortgage loans during the time from the closing of the loans to their sale or
other settlement with pre-approved investors, including the Long-Term
Investment Operations. IWLG's warehouse loans are secured by pledges of
mortgage notes owned by the borrowers that in turn are secured by mortgages on
real property. The Service has ruled that similar warehouse loans are
Qualified REIT Assets and that interest received on such loans is qualifying
interest under the 75% gross income test.

As described above, IMH owns 100% of the nonvoting preferred stock of ICIFC.
IMH does not and will not own any of the voting securities of ICIFC, and
therefore IMH will not be considered to own more than 10% of the voting
securities of ICIFC. In addition, IMH believes that the aggregate value of its
securities of ICIFC have not at any time exceeded, 5% of the total value of
IMH's assets, and will not exceed such amount in the future. However, there
can be no assurance that the Service will not contend that the value of the
securities of ICIFC held by IMH exceeds the 5% value limitation.

The 5% value test requires that IMH revalue its assets at the end of each
calendar quarter in which IMH acquires additional securities in ICIFC for the
purpose of applying such test. Although IMH plans to take steps to ensure that
it satisfies the 5% value test for any quarter with respect to which retesting
is to occur, there can be no assurance that such steps will always be
successful, or will not require a reduction in IMH's overall interest in
ICIFC.

IMH has taken and will continue to take measures to prevent the value of
securities issued by any one entity that do not constitute Qualified REIT
Assets from exceeding 5% of the value of IMH's total assets as of the end of
each calendar quarter. In particular, as of the end of each calendar quarter,
IMH has limited and diversified and will continue to limit and diversify its
ownership of securities of ICIFC and other securities that do not constitute
Qualified REIT Assets to less than 25%, in the aggregate, by value of its
portfolio, to less than 5% by value as to any single issuer, including ICIFC,
and to less than 10% of the voting stock of any single issuer. Moreover,
pursuant to its compliance guidelines, the Manager has monitored and will
continue to monitor (on not less than a quarterly basis) the purchase and
holding of IMH's assets in order for IMH to comply with the above asset tests.

When purchasing mortgage-related securities, IMH and its counsel may rely on
opinions of counsel for the issuer or sponsor of such securities given in
connection with the offering of such securities, or statements made in related
offering documents, for purposes of determining whether and to what extent
those securities (and the income therefrom) constitute Qualified REIT Assets
(and income) for purposes of the REIT asset tests (and the REIT gross income
tests discussed above).

A regular or residual interest in a REMIC will be treated as a Qualified
REIT Asset for purposes of the REIT asset tests and income derived with
respect to such interests will be treated as interest on obligations secured
by mortgages on real property, assuming that at least 95% of the assets of the
REMIC are Qualified REIT Assets. If less than 95% of the assets of the REMIC
are Qualified REIT Assets, only a proportionate share of the assets of and
income derived from the REMIC will be treated as qualifying under the REIT
asset and income tests. IMH believes that its REMIC interests fully qualify
for purposes of the REIT income and asset tests.

If IMH invests in a partnership, it will be deemed to own its proportionate
share of the assets of the partnership and will be deemed to be entitled to
the income of the partnership attributable to such share. In addition, the
character of the assets and gross income of the partnership shall retain the
same character in the hands of IMH for purposes of the REIT gross income tests
and the asset tests.

After initially meeting the asset tests at the close of any quarter, IMH
will not lose its status as a REIT for failure to satisfy the asset tests at
the end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results from an acquisition of securities
or other property during a quarter, the failure can be cured by disposition of
sufficient nonqualifying assets within 30 days after the close of that
quarter. IMH intends to maintain adequate records of the value of its assets
to ensure compliance with the asset tests and to take such other actions
within 30 days after the close of any quarter as may be required to cure any
noncompliance. If IMH fails to cure noncompliance with the asset tests within
such time period, IMH would cease to qualify as a REIT.

Annual Distribution Requirements. IMH, in order to qualify as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (i) the sum of (a) 95% of IMH's
"REIT taxable income" (computed without regard to the dividends paid deduction
and by excluding IMH's net capital gain) and (b) 95% of the net income (after
tax), if any, from foreclosure property, minus (ii) the sum of certain items
of noncash income. In addition, if IMH disposes of any Built-In Gain Asset
during its Recognition Period, IMH will be required, pursuant to Treasury
Regulations which have not yet been promulgated, to distribute at least 95% of
the Built-in Gain (after tax), if any, recognized on the disposition of such
asset. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before IMH timely files
its tax return for such year and if paid on or before the first regular
dividend payment date after such declaration and if IMH so elects and
specifies the dollar amount on its tax return. To the extent that IMH does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to
tax thereon at regular ordinary and capital gain corporate tax rates.
Furthermore, if IMH should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT capital gain net income for such year, and (iii) any undistributed
taxable income from prior periods, IMH would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually
distributed. IMH intends to make timely distributions sufficient to satisfy
these annual distribution requirements.

IMH anticipates that it will generally have sufficient cash or liquid assets
to enable it to satisfy the distribution requirements described above. It is
possible, however, that IMH, from time to time, may not have sufficient cash
or other liquid assets to meet these distribution requirements due to timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of IMH. For instance, IMH may
realize income without a corresponding cash payment, as in the case of
original issue discount or accrued interest on defaulted Mortgage Loans. In
the event that such timing differences occur, in order to meet the
distribution requirements, IMH may find it necessary to sell assets, arrange
for short-term, or possibly long-term, borrowings, or pay dividends in the
form of taxable stock dividends.

The Service has ruled that if a REIT's dividend reinvestment plan allows
stockholders of the REIT to elect to have cash distributions reinvested in
shares of the REIT at a purchase price equal to at least 95% of fair market
value on the distribution date, then such cash distributions reinvested
pursuant to such a plan qualify under the 95% distribution test. The terms of
IMH's DRP will comply with this ruling. See "Dividend Reinvestment Plan."

Under certain circumstances, IMH may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in IMH's deduction for
dividends paid for the earlier year. Thus, IMH may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, IMH will be
required to pay interest based upon the amount of any deduction taken for
deficiency dividends.

RECORDKEEPING REQUIREMENTS

A REIT is required to maintain certain records, including records regarding
the actual and constructive ownership of its shares, and within 30 days after
the end of its taxable year, to demand statements from persons owning above a
specified level of the REIT's shares (e.g., if IMH has over 200 but fewer than
2,000 stockholders of record, from persons holding 1% or more of IMH's
outstanding shares of common stock and if IMH has 200 or fewer shareholders of
record, from persons holding 1/2% or more of the Common Stock) regarding their
ownership of shares. In addition, IMH must maintain, as part of its records, a
list of those persons failing or refusing to comply with this demand.
Shareholders who fail or refuse to comply with the demand must submit a
statement with their tax returns setting forth the actual stock ownership and
other information. IMH has maintained and will continue to maintain the
records and demand statements as required by Treasury Regulations.

FAILURE TO QUALIFY

If IMH fails to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, IMH will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to stockholders in any year in which IMH fails to qualify
will not be deductible by IMH nor will they be required to be made. As a
result, IMH's failure to qualify as a REIT would substantially reduce the cash
available for distribution by IMH to its stockholders. In addition, if IMH
fails to qualify as a REIT, all distributions to stockholders will be taxable
as ordinary income, to the extent of IMH's current and accumulated earnings
and profits, and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, IMH will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether
in all circumstances IMH would be entitled to such statutory relief. Failure
to qualify for even one year could result in the IMH's incurring substantial
indebtedness (to the extent borrowings are feasible) or liquidating
substantial investments in order to pay the resulting taxes.

TAXATION OF TAXABLE U.S. STOCKHOLDERS GENERALLY

As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock who (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership,
or other entity created or organized in or under the laws of the United States
or of any political subdivision thereof, or (iii) is an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source.

As long as IMH qualifies as a REIT, distributions made by IMH out of its
current or accumulated earnings and profits (and not designated as capital
gain dividends) will constitute dividends taxable to its taxable U.S.
Stockholders as ordinary income. Such distributions will not be eligible for
the dividends received deduction in the case of U.S. Stockholders that are
corporations. Distributions made by IMH that are properly designated by IMH as
capital gain dividends will be taxable to taxable U.S. Stockholders as long-
term capital gains (to the extent that they do not exceed IMH's actual net
capital gain for the taxable year) without regard to the period for which a
U.S. Stockholder has held his shares of Common Stock. U.S. Stockholders that
are corporations may, however, be required to treat up to 20% of certain
capital gain dividends as ordinary income. To the extent that IMH makes
distributions (not designated as capital gain dividends) in excess of its
current and accumulated earnings and profits, such distributions will be
treated first as a tax-free return of capital to each U.S. Stockholder,
reducing the adjusted basis which such U.S. Stockholder has in his shares of
Common Stock for tax purposes by the amount of such distribution (but not
below zero), with distributions in excess of a U.S. Stockholder's adjusted
basis in his shares taxable as capital gains (provided that the shares have
been held as a capital asset). IMH will notify stockholders at the end of each
year as to the portions of the distributions which constitute ordinary income,
net capital gain or return of capital. Dividends declared by IMH in October,
November, or December of any year and payable to a stockholder of record on a
specified date in any such month shall be treated as both paid by IMH and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by IMH on or before January 31 of the following
calendar year. Stockholders may not include in their own income tax returns
any net operating losses or capital losses of IMH.

Dividends paid with respect to Common Stock that a DRP participant reinvests
in Common Stock through purchases by the Agent in the open market will be
treated for federal income tax purposes as having been received by the
participant in the form of a taxable cash distribution. The amount of the cash
distribution will be treated as a dividend to the extent IMH has current or
accumulated earnings and profits for federal income tax purposes.
Alternatively, dividends paid with respect to Common Stock that a participant
reinvests in Common Stock that are registered and newly issued by IMH will be
treated for federal income tax purposes as having been received by the
participant in the form of a taxable stock distribution. In that case, the DRP
participant will be treated as having received a dividend, taxable as ordinary
income to the extent IMH has current or accumulated earnings and profits, in
an amount equal to the fair market value of the Common Stock purchased

with the reinvested dividends, generally on the date that the Agent credits
such Common Stock to the DRP participant's account, plus brokerage commissions
and fees, if any, subtracted from the participant's distribution.

Distributions made by IMH and gain arising from the sale or exchange by a
U.S. Stockholder of shares of Common Stock will not be treated as passive
activity income, and, as a result, U.S. Stockholders generally will not be
able to apply any "passive losses" against such income or gain. Distributions
made by IMH (to the extent they do not constitute a return of capital)
generally will be treated as investment income for purposes of computing the
investment income limitation. Gain arising from the sale or other disposition
of Common Stock, however, will not be treated as investment income unless the
U.S. Stockholder elects to reduce the amount of such U.S. Stockholder's total
net capital gain eligible for the 28% maximum capital gains rate by the amount
of such gain with respect to such Common Stock.

Upon any sale or other disposition of Common Stock, a U.S. Stockholder will
recognize gain or loss for federal income tax purposes in an amount equal to
the difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition and (ii) the holder's
adjusted basis in such shares of Common Stock for tax purposes. Such gain or
loss will be capital gain or loss if the shares have been held by the U.S.
Stockholder as a capital asset, and will be long-term gain or loss if such
shares have been held for more than one year. In general, any loss recognized
by a U.S. Stockholder upon the sale or other disposition of shares of Common
Stock that have been held for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the
extent of distributions received by such U.S. Stockholder from IMH which were
required to be treated as long-term capital gains.

IMH does not expect to acquire or retain residual interests issued by
REMICs. Such residual interests, if acquired by a REIT, could generate excess
inclusion income taxable to the REIT's stockholders in proportion to the
dividends received from the REIT. Excess inclusion income cannot be offset by
net operating losses of a stockholder. If the stockholder of a REIT holding a
residual interest in a REMIC is a tax-exempt entity, the excess inclusion
income is fully taxable to such stockholder as unrelated business taxable
income. If allocated to a Non-U.S. Stockholder (as defined below), the excess
inclusion income is subject to federal income tax withholding without
reduction pursuant to any otherwise applicable tax treaty. Potential
investors, and in particular, tax-exempt entities, are urged to consult with
their tax advisors concerning this issue.

IMH has financed and intends to continue to finance the acquisition of
mortgage assets by entering into reverse repurchase agreements, which are
essentially loans secured by IMH's mortgage assets. IMH has entered into
master repurchase agreements with secured lenders known as "counterparties."
Typically, such master repurchase agreements have cross-collateralization
provisions that afford the counterparty the right to foreclose on the mortgage
assets pledged as collateral. If the Service were to successfully take the
position that the cross-collateralization provisions of the master repurchase
agreements result in IMH having issued debt instruments (the reverse
repurchase agreements) with differing maturity dates secured by a pool of
mortgage loans, a portion of IMH's income could be characterized as excess
inclusion income. In the absence of any definitive authority on this issue,
there can be no complete assurance regarding whether the cross-
collateralization provisions of the master repurchase agreements will not
cause IMH to realize excess inclusion income.

BACKUP WITHHOLDING

IMH will report to its U.S. Stockholders and the Service the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to dividends paid unless
such holder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. Stockholder that does not provide IMH with
his correct taxpayer identification number may also be subject to penalties
imposed by the Service. Any amount paid as backup withholding will be
creditable against the stockholder's income tax liability. In addition, IMH
may be required to withhold a portion of capital gain distributions to any
stockholders who fail to certify their non-foreign status to IMH.

TAXATION OF TAX-EXEMPT STOCKHOLDERS

Generally, a tax-exempt investor that is exempt from tax on its investment
income, such as an individual retirement account (IRA) or a 401(k) plan, that
holds Common Stock as an investment will not be subject to tax on dividends
paid by IMH. However, if such tax-exempt investor is treated as having
purchased its Common Stock with borrowed funds, some or all of its dividends
from the Common Stock will be subject to tax. In addition, under some
circumstances certain pension plans (including 401(k) plans but not including
IRAs and government pension plans) that own more than 10% (by value) of IMH's
outstanding stock, including Common Stock, could be subject to tax on a
portion of their Common Stock dividends even if their Common Stock is held for
investment and is not treated as acquired with borrowed funds. The ownership
limit (see "Description of Capital Stock--Repurchase of Shares and
Restrictions on Transfer"), however, should prevent this result.

TAXATION OF NON-U.S. STOCKHOLDERS

The preceding discussion does not address the rules governing United States
federal income taxation of the ownership and disposition of Common Stock by
persons that are not U.S. Stockholders ("Non-U.S. Stockholders"). In general,
Non-U.S. Stockholders may be subject to special tax withholding requirements
on distributions from IMH and with respect to their sale or other disposition
of Common Stock, except to the extent reduced or eliminated by an income tax
treaty between the United States and the Non-U.S. Stockholder's country. A
Non-U.S. Stockholder who is a stockholder of record and is eligible for
reduction or elimination of withholding must file an appropriate form with IMH
in order to claim such treatment. Non-U.S. Stockholders should consult their
own tax advisors concerning the federal income tax consequences to them of a
purchase of shares of IMH's Common Stock including the federal income tax
treatment of dispositions of interests in, and the receipt of distributions
from IMH.

OTHER TAX CONSEQUENCES

ICIFC will not qualify as a REIT and will pay federal, state and local
income taxes on its taxable income at normal corporate rates. As a result,
ICIFC is able to distribute only its net after-tax earnings to its
shareholders, including IMH, as dividend distributions, thereby reducing the
cash available for distribution by IMH to its stockholders.

IMH and its stockholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of IMH and its
stockholders may not conform to the federal income tax consequences discussed
above. Consequently, prospective stockholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
IMH.

ERISA INVESTORS

A fiduciary of a pension, profit-sharing, stock bonus plan or individual
retirement account, including a plan for self-employed individuals and their
employees or any other employee benefit plan (collectively, a "Plan") subject
to the prohibited transaction provisions of the Code or the fiduciary
responsibility provisions of the Employee Retirement Income Security Act of
1974 ("ERISA"), should consider (1) whether the ownership of the Common Stock
is in accordance with the documents and instruments governing the Plan, (2)
whether the ownership of the Common Stock is consistent with the fiduciary's
responsibilities and satisfies the requirements of Part 4 of Subtitle A of
Title I of ERISA (if applicable) and, in particular, the diversification,
prudence and liquidity requirements of Section 404 of ERISA, (3) the
prohibitions under ERISA on improper delegation of control over, or
responsibility for "plan assets" and ERISA's imposition of co-fiduciary
liability on a fiduciary who participates in, or permits (by action or
inaction) the occurrence of, or fails to remedy a known breach of duty by
another fiduciary with respect to plan assets, and (4) the need to value the
assets of the Plan annually.

UNDERWRITING

Under the terms of and subject to the conditions contained in the
underwriting agreement (the "Underwriting Agreement") between the Company and
the Underwriters named below (the "Underwriters"), for whom PaineWebber
Incorporated, Oppenheimer & Co., Inc., Stifel, Nicolaus & Company,
Incorporated and EVEREN Securities, Inc. are acting as representatives (the
"Representatives"), the Underwriters have severally agreed to purchase from
the Company and the Company has agreed to sell to the Underwriters severally
the respective number of shares set forth opposite its name below:

NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------

PaineWebber Incorporated........................................
Oppenheimer & Co., Inc. ........................................
Stifel, Nicolaus & Company, Incorporated........................
EVEREN Securities, Inc..........................................
---------
Total......................................................... 2,500,000
=========

In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock being sold pursuant to the Underwriting Agreement
(other than those covered by the over-allotment option described below), if
any shares of Common Stock are purchased. In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares in part to the public at the public offering price
set forth on the cover page of this Prospectus, and in part to certain
securities dealers (who may include Underwriters) at such price less a
concession not in excess of $ per share, and that the Underwriters and
such dealers may reallow to certain dealers a discount not in excess of $
per share. After commencement of the public offering, the public offering
price, concessions to selected dealers and the discount to other dealers may
be changed by the Representatives.

The Company has granted an option to the Underwriters, exercisable during
the 45-day period after the date of this Prospectus, to purchase, at the
Offering Price less the underwriting discount and commissions set forth on the
cover page of this Prospectus, 375,000 additional shares of Common Stock. The
Underwriters may exercise such option only to cover over-allotments, if any,
made in connection with the offering of the shares of Common Stock offered
hereby. To the extent the Underwriters exercise such option, each of the
Underwriters will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such option shares as it was obligated to
purchase pursuant to the Underwriting Agreement.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Federal securities laws, or to
contribute to payments which the Underwriters may be required to make in
respect thereof.

The Company, ICII, SPTL and certain stockholders have also agreed with the
Underwriters that, for a period of 120 days following the commencement of this
Offering, they will not offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or rights to acquire such shares (other than
pursuant to employee plans or the DRP) without the prior written consent of
PaineWebber Incorporated.

Certain of the Underwriters, including the Representatives, have in the past
performed, and may continue to perform investment banking services for the
Company and have received customary compensation therefor. In addition, an
affiliate of PaineWebber Incorporated has, in the ordinary course of business,
extended to the Company a secured warehouse and repurchase credit facility.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed on for the
Company by Freshman, Marantz, Orlanski, Cooper & Klein, Beverly Hills,
California, certain legal matters, including certain tax matters, will be
passed on for the Company by Latham & Watkins, Los Angeles, California, and
certain legal matters with respect to Maryland law will be passed on for the
Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. Certain
legal matters will be passed on for the Underwriters by Paul, Weiss, Rifkind,
Wharton & Garrison, New York, New York.

EXPERTS

The financial statements of Imperial Credit Mortgage Holdings, Inc. and ICI
Funding Corporation as of December 31, 1995 and 1994, and for each of the
years in the three-year period ended December 31, 1995, have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the December 31, 1995 financial statements
contains an explanatory paragraph that states the Company adopted the
provisions of Statement of Financial Accounting Standards No. 122, "Accounting
for Mortgage Servicing Rights" for the year ended December 31, 1995.

ADDITIONAL INFORMATION

Copies of the Registration Statement of which this Prospectus forms a part
and the exhibits thereto are on file at the offices of the Commission in
Washington, D.C. and may be obtained at rates prescribed by the Commission
upon request to the Commission and inspected, without charge, at the offices
of the Commission. The Company is subject to the informational requirements of
the Exchange Act, and in accordance therewith, periodically files reports and
other information with the Commission. Such reports and other information can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W, Washington, D.C. 20549, and at the
Commission's regional offices at Northwestern Atrium Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661 and 7 World Trade Center, New
York, New York 10048. Copies of such material can also be obtained from the
Commission at prescribed rates through its Public Reference Section at 450
Fifth Street, N.W, Washington, D.C. 20549. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

GLOSSARY

As used in this Prospectus, the capitalized and other terms listed below
have the meanings indicated.

"Affiliated Person" means of any entity: (1) any person directly or
indirectly owning, controlling, or holding with the power to vote, five
percent (5%) or more of the outstanding securities of such entity; (2) any
person five percent (5%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote, by such
entity; (3) any person directly or indirectly controlling, controlled by, or
under common control with, such entity or (4) any officer, director or
employee of such entity or any person set forth in (1), (2) or (3) above. Any
person who owns beneficially, either directly or through one or more
controlled companies, more than twenty-five percent (25%) of the voting
securities of any entity shall be presumed to control such entity. Any person
who does not so own more than twenty-five percent (25%) of the voting
securities of any entity shall be presumed not to control such entity. A
natural person shall be presumed not to be a controlled entity.

"Agency" means FNMA, FHLMC or GNMA.

"Agency Certificates" means Pass-Through Certificates guaranteed by FNMA,
FHLMC or GNMA.

"AMEX" means American Stock Exchange, Inc.

"ARM" means a mortgage loan or any mortgage loan underlying a Mortgage
Security that features adjustments of the underlying interest rate at
predetermined times based on an agreed margin to an established index. An ARM
is usually subject to periodic interest rate and/or payment caps and a
lifetime interest rate cap.

"Average Net Worth" means the arithmetic average of the sum of the gross
proceeds from any sale of equity securities by the Company, before deducting
any underwriting discounts and commissions and other expenses and costs
relating to the offering, plus the Company's retained earnings (without taking
into account any losses incurred in prior periods) computed by taking the
daily average of such values during such period.

"Bankruptcy Code" means Title 11, United States Code, as amended.

"Charter" means the Articles of Incorporation of IMH and amendments thereto.

"CMO" means an adjustable or fixed-rate debt obligation (bond) that is
collateralized by mortgage loans or mortgage certificates and issued by
private institutions or issued or guaranteed by FNMA, FHLMC or GNMA.

"CMT Index" means the one year constant maturity Treasury index.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Company" means IMH, ICIFC and IWLG as a combined entity unless the context
requires otherwise.

"Conduit Operations" means ICIFC.

"Conforming loan" or "conforming mortgage loan" means a mortgage loan that
complies with requirements for inclusion in credit support programs sponsored
by FHLMC or FNMA which are secured by first or second mortgages or deeds of
trust on single-family (one to four units) residences.

"DRP" means the Dividend Reinvestment Plan adopted by the Company.

"DRP Purchase Price" means (1) in the case of Common Stock purchased from
the Company, 97% of the average of the daily high and low of the Common Stock,
computed to three decimal places, as reported in the

NYSE Composite Transactions in The Wall Street Journal for the three days that
the Common Stock was traded on the NYSE immediately prior to the applicable
dividend payment date, (2) in the case of Common Stock purchased on the open
market, 97% of the weighted average, computed to three decimal places, of the
purchase prices for the Common Stock purchased by the DRP administrator (as
defined in the DRP).

"11th District Cost of Funds" means the index made available monthly by the
Federal Home Loan Bank Board of the cost of funds to members of the Federal
Home Loan Bank 11th District.

"ERISA" means the Employee Retirement Income Security Act of 1974.

"ERISA Plan" or "Plan" means a pension, profit-sharing, retirement or other
employee benefit plan which is subject to ERISA.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"5/25 mortgage loan" means a loan that adjusts on a one-time basis
approximately five years following origination to an interest rate based upon
a defined index plus a spread.

"FHA" means the United States Federal Housing Administration.

"FHLMC" means the Federal Home Loan Mortgage Corporation.

"FMAC" means Franchise Mortgage Acceptance Company LLC.

"FNMA" means the Federal National Mortgage Association.

"GNMA" means Government National Mortgage Association.

"GAAP" means generally accepted accounting principles.

"Gross Mortgage Assets" means for any month the weighted average aggregate
book value of the Mortgage Assets, before reserves for depreciation or bad
debts or other similar noncash reserves, computed at the end of such month.

"HUD" means the Department of Housing and Urban Development.

"IMH" means Imperial Credit Mortgage Holdings, Inc., a Maryland corporation.

"ICIFC" means ICI Funding Corporation, a California corporation that
conducts the Conduit Operations.

"Interim Period" means the period from November 20, 1995 through December
31, 1995.

"Investment Company Act" means the Investment Company Act of 1940, as
amended.

"ISOs" means qualified incentive stock options granted under the Stock
Option Plan, which meet the requirements of Section 422 of the Code.

"IWLG" means Imperial Warehouse Lending Group, Inc., a California
corporation that will be treated as a Qualified REIT Subsidiary of IMH.

"Keogh Plans" means H.R. 10 Plans.

"LIBOR" means the London interbank offered rate.

"Long-Term Investment Operations" means IMH.

"LTV" or "loan-to-value ratio" means the percentage obtained by dividing the
principal amount of a loan by the lower of the sales price or appraised value
of the mortgaged property when the loan is originated.

"Master Commitments" means commitments issued by the Company which will
obligate the Company to purchase Mortgage Assets from the holders of the
commitment for a specified period of time, in a specified aggregate principal
amount and at a specified price.

"MGCL" means the Maryland General Corporation Law, as amended from time to
time.

"Mortgage Assets" means (1) mortgage loans, (2) mortgage-backed securities
and (3) other mortgage interests, which constitute Real Estate Assets.

"MSRs" means mortgage servicing rights.

"mortgage loans" means both conforming mortgage loans and non-conforming
mortgage loans.

"mortgage-backed securities" means (1) pass-through certificates, (2) CMOs
and (3) REMICs.

"Net Income" means the net income of the Company determined in accordance
with GAAP before the Manager's incentive compensation, the deduction for
dividends paid, and any net operating loss deductions arising from losses in
prior periods. The Company's interest expenses for borrowed money shall be
deducted in calculating Net Income.

"non-conforming loan" or "non-conforming mortgage loan" means a mortgage
loan that does not qualify for purchase by government-sponsored entities such
as FNMA and FHLMC.

"Ownership Limit" means 9.5% (in value or in number of shares, whichever is
more restrictive) of the aggregate of the outstanding shares of Common Stock,
as may be increased or reduced by the Board of Directors of the Company.

"Pass-Through Certificates" means securities (or interests therein) which
are Qualified REIT Assets evidencing undivided ownership interests in a pool
of mortgage loans, the holders of which receive a "pass-through" of the
principal and interest paid in connection with the underlying mortgage loans
in accordance with the holders' respective, undivided interests in the pool.
Pass-Through Certificates evidence interests in loans secured by single
family, but not multifamily or commercial, real estate properties.

"Privately-Issued Certificates" means privately-issued Pass-Through
Certificates issued by the Company or an affiliate of the Company or other
non-Agency third party issuer.

"Qualified Hedge" means a bona fide interest rate swap or cap agreement
entered into by IMH to hedge variable rate indebtedness only, that IMH
incurred or expects to incur to acquire or carry Qualified REIT Assets, as
defined in Section 856(c)(6)(G) of the Code.

"Qualified REIT Assets" means Pass-Through Certificates, mortgage loans,
Agency Certificates and other assets of the type described in Code Section
856(c)(6)(B).

"Qualified REIT Subsidiary" means a corporation whose stock is entirely
owned by the REIT at all times during such corporation's existence.

"Qualifying Interests" means "mortgages and other liens on and interests in
real estate," as defined in Section 3(c)(5)(C) under the Investment Company
Act.

"Real Estate Asset" means interests in real property, interests in mortgages
on real property, and regular interests in REMICS.

"REIT" means real estate investment trust as defined under Section 856 of
the Code.

"REMIC" means serially maturing debt securities secured by a pool of
mortgage loans, the payments on which bear a relationship to the debt
securities and the issuer of which qualifies as a Real Estate Mortgage
Investment Conduit as defined under Section 860D of the Code.

"reverse repurchase agreement" means a borrowing device by an agreement to
sell securities or other assets to a third party and a simultaneous agreement
to repurchase them at a specified future date and price, the price difference
constituting the interest on the borrowing.

"Return on Equity" means return calculated for any quarter by dividing the
Company's Net Income for the quarter by its Average Net Worth for the quarter.

"Securities Act" means the Securities Act of 1933, as amended.

"Service" means the United States Internal Revenue Service.

"SPTL" means Southern Pacific Thrift and Loans Association, a state
chartered industrial loan law.

"Tax-Exempt Entity" means a qualified pension, profit-sharing or other
employee retirement benefit plan, Keogh Plan, bank commingled trust fund for
such plans, an IRA or other similar entity intended to be exempt from federal
income taxation.

"Ten Year U.S. Treasury Rate" means the average of the weekly average yield
to maturity for U.S. Treasury securities (adjusted to a constant maturity of
10 years) as published weekly by the Federal Reserve Board during a quarter.

"25% entity" means any entity of which ICII owns 25% or more of the voting
securities.

"25% Incentive Payment" means incentive compensation for each fiscal
quarter, in an amount equal to 25% of the Net Income of the Company, before
deduction of such incentive compensation, in excess of the amount that would
produce an annualized Return on Equity equal to the Ten Year U.S. Treasury
Rate plus 2%.

"UBTI" means "unrelated trade or business taxable income" as defined in
Section 512 of the Code.

"Unaffiliated Director" means a Director who is independent of the Company,
any manager of the Company (including ICAI) and ICII and its Affiliated
Persons.

"VA" means the United States Department of Veterans Affairs.

"Warehouse Lending Operations" means IWLG.

INDEX TO FINANCIAL STATEMENTS

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Changes in Stockholders' Equity................. F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7

ICI FUNDING CORPORATION

Independent Auditors' Report.............................................. F-26
Balance Sheets............................................................ F-27
Statements of Operations.................................................. F-28
Statements of Changes in Shareholders' Equity............................. F-29
Statements of Cash Flows.................................................. F-30
Notes to Financial Statements............................................. F-31

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Imperial Credit Mortgage Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Imperial
Credit Mortgage Holdings, Inc. and subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Imperial Credit Mortgage Holdings, Inc. and subsidiary as of December 31,
1995 and 1994, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.

As discussed in note 1 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" for the year ended December 31,
1995.

KMPG Peat Marwick LLP

Orange County, California
January 25, 1996

F-2

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
MARCH 31, ------------------------
1996 1995 1994
------------ ------------ ----------
(UNAUDITED)
ASSETS
------

Cash and cash equivalents. $ 17,067,858 $ 2,284,482 $ --
Investment securities
available-for-sale....... 33,242,883 17,378,238 --
Mortgage loans held for
investment............... 311,460,948 -- --
Finance receivables, net.. 196,065,560 582,921,113 3,024,440
Lease payment receivables
held for sale............ 7,805,691 8,440,644 --
Accrued interest receiv-
able..................... 5,610,768 1,645,414 5,136
Due from affiliates....... 1,390,488 113,089 --
Investment in ICI Funding
Corporation.............. 9,535,887 865,839 6,335,058
Other assets.............. -- 39,512 --
------------ ------------ ----------
$582,180,083 $613,688,331 $9,364,634
============ ============ ==========

LIABILITIES AND STOCKHOLDERS'
-----------------------------
EQUITY
------

Due to affiliates......... $ 6,040,036 $ -- $ --
Reverse-repurchase agree-
ments.................... 528,745,568 567,727,361 --
Borrowings from SPTL...... -- -- 2,511,379
Other liabilities......... 778,903 725,146 --
------------ ------------ ----------
Total liabilities....... 535,564,507 568,452,507 2,511,379
------------ ------------ ----------
Commitments and contingen-
cies
Stockholders' equity:
Preferred stock, $0.1 par
value; 10 million shares
authorized; none issued
or outstanding at March
31, 1996 (unaudited) and
at December 31, 1995 and
1994.................... -- -- --
Common stock, $.01 par
value; 50 million shares
authorized; 4,250,000
shares issued and
outstanding at March 31,
1996 (unaudited) and at
December 31, 1995 and
none issued and
outstanding at
December 31, 1994....... 42,500 42,500 --
Additional paid-in
capital................. 44,970,544 44,970,544 --
Contributed capital...... -- -- 357,558
Investment securities
valuation allowance..... (66,550) (92,663) --
Retained earnings........ 1,669,082 315,443 6,495,697
------------ ------------ ----------
Total stockholders'
equity................. 46,615,576 45,235,824 6,853,255
------------ ------------ ----------
$582,180,083 $613,688,331 $9,364,634
============ ============ ==========

See accompanying notes to consolidated financial statements.

F-3

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS FOR THE YEAR ENDED DECEMBER
ENDED MARCH 31, 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
----------- -------- ---------- -------- ----------
(UNAUDITED)

Revenues:
Interest income....... $13,009,977 $ 85,660 $2,851,216 $292,665 $ 766,875
Equity in net income
of ICI Funding
Corporation.......... 542,149 403,747 1,489,276 531,688 4,191,701
Fee income............ 172,096 30,766 243,155 82,742 320,173
----------- -------- ---------- -------- ----------
13,724,222 520,173 4,583,647 907,095 5,278,749
----------- -------- ---------- -------- ----------
Expenses:
Interest on borrowings
from reverse
repurchase
agreements........... 9,009,167 -- 1,116,287 -- --
Interest on borrowings
from SPTL............ -- 47,698 598,421 126,524 334,220
Provision for loan
losses............... 2,415,000 104,152 487,505 95,374 --
Advisory fee.......... 426,222 -- 37,888 -- --
General and adminis-
trative expense...... 88,469 5,019 40,113 32,517 32,700
Professional services. 44,493 4,305 54,336 14,460 17,590
Personnel expense..... 43,792 18,455 90,737 143,308 110,269
Telephone and other
communications....... 2,122 3,023 11,112 11,039 8,876
Occupancy expense..... 1,095 1,026 9,405 19,611 24,504
Data processing ex-
pense................ 223 810 3,619 4,229 3,173
----------- -------- ---------- -------- ----------
12,030,583 184,488 2,449,423 447,062 531,332
----------- -------- ---------- -------- ----------
Income before income
taxes.................. 1,693,639 335,685 2,134,224 460,033 4,747,417
Income (taxes) benefit.. -- 28,586 (75,849) 30,095 (233,401)
----------- -------- ---------- -------- ----------
Net income............ $ 1,693,639 $364,271 $2,058,375 $490,128 $4,514,016
=========== ======== ========== ======== ==========
Net income per share.. $ .39 -- $ .07 -- --
=========== ======== ========== ======== ==========

See accompanying notes to consolidated financial statements.

F-4

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

NUMBER OF ADDITIONAL SECURITIES TOTAL
SHARES COMMON PAID-IN CONTRIBUTED VALUATION RETAINED STOCKHOLDERS'
OUTSTANDING STOCK CAPITAL CAPITAL ALLOWANCE EARNINGS EQUITY
----------- ------- ----------- ----------- ---------- ----------- -------------

Balance, December 31,
1992................... -- $ -- $ -- $ -- $ -- $ 1,491,553 $ 1,491,553
Net income, 1993........ -- -- -- -- -- 4,514,016 4,514,016
--------- ------- ----------- -------- -------- ----------- -----------
Balance, December 31,
1993................... -- -- -- -- -- 6,005,569 6,005,569
Capital contribution.... -- -- -- 357,558 -- -- 357,558
Net income, 1994........ -- -- -- -- -- 490,128 490,128
--------- ------- ----------- -------- -------- ----------- -----------
Balance, December 31,
1994................... -- -- -- 357,558 -- 6,495,697 6,853,255
Contribution Transac-
tion................... 500,000 5,000 514,750 (357,558) -- (8,238,629) (8,076,437)
Net proceeds, from ini-
tial public offering... 3,750,000 37,500 44,455,794 -- -- -- 44,493,294
Net income, 1995........ -- -- -- -- -- 2,058,375 2,058,375
Securities valuation al-
lowance, net........... -- -- -- -- (92,663) -- (92,663)
--------- ------- ----------- -------- -------- ----------- -----------
Balance, December 31,
1995................... 4,250,000 42,500 44,970,544 -- (92,663) 315,443 45,235,824
Dividends paid ($.08 per
share) (unaudited)..... -- -- -- -- -- (340,000) (340,000)
Net income, three months
ended March 31, 1996
(unaudited)............ -- -- -- -- -- 1,693,639 1,693,639
Change in securities
valuation allowance
(unaudited)............ -- -- -- -- 26,113 -- 26,113
--------- ------- ----------- -------- -------- ----------- -----------
Balance, March 31, 1996
(unaudited)............ 4,250,000 $42,500 $44,970,544 $ -- $(66,550) $ 1,669,082 $46,615,576
========= ======= =========== ======== ======== =========== ===========

See accompanying notes to consolidated financial statements.

F-5

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------
1996 1995 1995 1994 1993
------------- ----------- ------------- ----------- -----------
(UNAUDITED)

Cash flows from operat-
ing activities:
Net income............. $ 1,693,639 $ 364,271 $ 2,058,375 $ 490,128 $ 4,514,016
Adjustments to
reconcile net income
to net cash provided
by (used in) operating
activities:
Equity in net income of
ICI Funding
Corporation........... (542,149) (403,747) (1,489,276) (531,688) (4,191,701)
Provision for loan
losses................ 2,415,000 104,152 487,505 95,374 --
Net change in accrued
interest on loans..... (3,965,354) (3,008) (1,701,133) 4,565 (9,701)
Net change in other
assets and
liabilities........... 4,855,906 -- 572,545 -- --
------------- ----------- ------------- ----------- -----------
Net cash provided by
(used in) operating
activities........... 4,457,042 61,668 (71,984) 58,379 312,614
------------- ----------- ------------- ----------- -----------
Cash flows from invest-
ing activities:
Change in mortgage
loans held for
investment, net....... (313,750,948) -- -- -- --
Change in finance
receivables........... 386,730,553 (3,179,559) (602,737,414) 5,015,658 886,512
Purchases of investment
securities available-
for-sale.............. (15,838,531) -- (17,470,901) -- --
Net decrease (increase)
in lease payment
receivables........... 634,953 -- (8,440,644) -- --
Contributions to ICIFC. (8,127,900) -- (495,000) -- --
------------- ----------- ------------- ----------- -----------
Net cash provided by
(used in) investing
activities........... 49,648,127 (3,179,559) (629,143,959) 5,015,658 886,512
------------- ----------- ------------- ----------- -----------
Cash flows from financ-
ing activities:
Proeeds from initial
public offering, net.. -- -- 44,493,294 -- --
Net change in
borrowings from SPTL.. -- 3,117,891 19,279,770 (5,074,037) (1,199,126)
Net change in reverse-
repurchase agreements. (38,981,793) -- 567,727,361 -- --
Dividends paid......... (340,000) -- -- -- --
------------- ----------- ------------- ----------- -----------
Net cash provided by
(used in) financing
activities........... (39,321,793) 3,117,891 631,500,425 (5,074,037) (1,199,126)
------------- ----------- ------------- ----------- -----------
Net change in cash and
cash equivalents....... 14,783,376 -- 2,284,482 -- --
Cash and cash
equivalents at
beginning of period.... 2,284,482 -- -- -- --
------------- ----------- ------------- ----------- -----------
Cash and cash
equivalents at end of
period................. $ 17,067,858 $ -- $ 2,284,482 $ -- $ --
============= =========== ============= =========== ===========
Supplementary informa-
tion:
Interest paid.......... $ 8,998,886 $ 47,698 $ 1,714,708 $ 126,524 $ 334,220
Income taxes paid
(refunded)............ -- (32,941) -- (30,095) 233,401
============= =========== ============= =========== ===========
Non-cash transactions:
Contribution Transaction
on November 20, 1995:
Net assets reverted to
ICII and SPTL:
Finance receivables.... $ -- $ -- $ 22,353,236 $ -- $ --
Investment in ICIFC.... -- -- 7,973,245 -- --
Accrued interest
receivable............ -- -- 60,855 -- --
Borrowings from SPTL... -- -- 21,791,149 -- --
Contributed capital.... -- -- 357,558 -- --
Retained earnings...... -- -- 8,238,629 -- --
Contribution by ICII of
100% of the preferred
stock of ICI Funding
Corporation
(representing
a 99% economic
interest)............... -- -- 519,750 -- --
Unrealized losses on
investment securities
available-for-sale..... 26,113 -- (92,663) -- --

See accompanying notes to consolidated financial statements.

F-6

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Imperial Credit Mortgage Holdings, Inc. and subsidiary (IMH or the Company)
is a Maryland corporation formed on August 28, 1995 that operates three
businesses, two of which were formerly owned and operated by Imperial Credit
Industries, Inc. (ICII), a leading diversified financial services company and
mortgage bank. IMH intends to operate so as to qualify as a real estate
investment trust (REIT) under the requirements of the Internal Revenue Code.
The business objectives are discussed in the succeeding three paragraphs.

The Long-Term Investment Operations, a newly created business, invests
primarily in non-conforming residential mortgage loans and mortgage-backed
securities secured by or representing interests in such loans. The Long-Term
Investment Operations also invest, to a lesser extent, in second mortgages.

The Conduit Operations, conducted in ICI Funding Corporation (ICIFC),
primarily purchases non-conforming mortgage loans and, to a lesser extent,
second mortgage loans from its network of third party correspondents and
subsequently securitizes or sells such loans to permanent investors. ICIFC, in
addition to its ongoing securitizations and sales to third party investors,
supports the Long-Term Investment Operations of the Company by supplying IMH
with non-conforming mortgage loans and securities backed by non-conforming
mortgage loans at costs which the Company believes are lower than would be
available through third parties.

The Warehouse Lending Operations provides short-term lines of credit to
ICIFC and other approved mortgage banks, most of which are correspondents of
ICIFC, to finance mortgage loans during the time from the closing of the loans
to their sale or other settlement with pre-approved investors.

CONTRIBUTION TRANSACTION

On November 20, 1995, the effective date of IMH's initial public offering
(Initial Public Offering), ICII contributed to ICIFC certain operating assets
and certain customer lists of ICII's mortgage conduit operations, including
all of ICII's mortgage conduit operations' commitments to purchase mortgage
loans, subject to rate locks from correspondents, in exchange for shares
representing 100% of the common stock and 100% of the non-voting preferred
stock of ICIFC. Simultaneously, on the effective date of the Initial Public
Offering, in exchange for 500,000 shares of IMH Common Stock, ICII (1)
contributed to IMH all of the outstanding non-voting preferred stock of ICIFC,
which represents 99% of the economic interest in ICIFC, (2) caused Southern
Pacific Thrift and Loan Association (SPTL), a wholly owned subsidiary of ICII,
to contribute to IMH certain operating assets and certain customer lists of
SPTL's warehouse lending division, and (3) executed an agreement not to
compete and a right of first refusal agreement, each having a term of two
years from the effective date of the Initial Public Offering. This
contribution is known as the "Contribution Transaction." All of the
outstanding shares of common stock of ICIFC were retained by ICII. Lastly, IMH
contributed all of the aforementioned operating assets of SPTL's warehouse
lending operations contributed to it by SPTL to Imperial Warehouse Lending
Group (IWLG) in exchange for shares representing 100% of the common stock of
IWLG thereby forming it as a wholly owned subsidiary. On the effective date of
the Initial Public Offering, the net tangible book value of the assets
contributed pursuant to the Contribution Transaction was $525,000. The assets
contributed were recorded by IMH at the net book value of SPTL and ICII. ICII
and SPTL retained all other assets and liabilities related to the contributed
operations which consist of mortgage servicing rights (MSRs), finance
receivables and advances made by ICII and SPTL to fund mortgage conduit loan
acquisitions and to fund finance receivables.

F-7

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

BASIS OF FINANCIAL STATEMENT PRESENTATION

Prior to the Contribution Transaction, the operations of IWLG are combined
with the Company in a manner similar to a "pooling-of-interests" and the
Company's investment in ICIFC is recorded using the equity method of
accounting, with the accompanying consolidated financial statements and notes
reflecting the historical operations of IWLG for those periods presented.

The historical operations of IWLG, formerly a division of SPTL, have been
presented in the consolidated financial statements for the period January 1,
1995 to November 19, 1995 and for the years ended December 31, 1994 and 1993
as a stand-alone company. Certain adjustments, as described below, were made
to historical operations in order to provide fair presentation of the
financial operations of IWLG.

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and prevailing practices within the
financial services industry. In preparing the consolidated financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ significantly from those estimates.

All material intercompany balances and transactions with IMH's consolidated
subsidiary (IWLG) have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, cash and cash
equivalents consists of cash and money market mutual funds. The Company
considers investments with maturities of three months or less at date of
acquisition to be cash equivalents.

BORROWINGS FROM SPTL

Historical operations of IWLG have been adjusted to reflect the funding of
net assets by SPTL. The adjustments are disclosed in the accompanying
consolidated balance sheets as "Borrowings from SPTL." These borrowings were
recorded at no more than 98% of total finance receivables which is the maximum
advance rate allowed under current ICII warehouse lines of credit.
Additionally, the historical operations of IWLG have been adjusted to reflect
the estimated interest charges on these borrowings. In order to reflect all
costs of doing business in the financial statements, interest charges have
been allocated to IWLG in the accompanying consolidated statements of
operations.

F-8

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The interest charges allocated are based upon estimated average borrowings
balances of IWLG and SPTL's average cost of funds, which were computed based
on a weighted average of SPTL borrowings. The average borrowings and interest
rates used to determine the interest on IWLG borrowings are as follows:

FOR THE YEAR ENDED
DECEMBER 31,
----------------------
JANUARY 1,
1995 FOR THE
THROUGH THREE MONTHS
NOVEMBER ENDED MARCH 31,
19, 1995 1995 1994 1993
----------- --------------- ---------- ----------
(UNAUDITED)

Estimated average
borrowings............... $11,258,467 $3,343,987 $3,045,442 $9,821,232
Interest rate............. 5.80% 5.71% 4.15% 3.40%
Interest allocation....... $ 598,421 $ 47,698 $ 126,524 $ 334,220

EQUITY

Prior to the effective date of the offering, IWLG had no capital or retained
earnings recorded in its accounts. To properly reflect the historical
financial operations of IWLG, retained earnings were recorded as a result of
net income or loss from operations on an adjusted historical basis.

INVESTMENT IN ICI FUNDING CORPORATION

The Company records its investment in ICIFC on the equity method. ICII owns
all of the common stock of ICIFC and is entitled to 1% of the earnings or loss
of ICIFC. The Company is entitled to 99% of the earnings or losses of ICIFC
through its ownership of all of the non-voting preferred stock in ICIFC. ICIFC
is a mortgage loan conduit organization, which purchases mortgage loans and
subsequently securitizes or sells such loans to permanent investors, including
IMH (see note 14).

INVESTMENT SECURITIES AVAILABLE FOR SALE

The Company accounts for investment securities in accordance with Statement
of Financial Accounting Standard No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." This statement requires the Company to
classify investment and mortgage-backed securities as held-to-maturity,
available-for-sale, and/or trading securities. Held-to-maturity investment and
mortgage-backed securities are reported at amortized cost, available-for-sale
securities are reported at fair value with unrealized gains and losses, net of
related income taxes, as a separate component of stockholders' equity, and
trading securities are reported at fair value with unrealized gains and losses
reported in income. Discounts obtained on investment securities are amortized
to interest income over the estimated life of the investment securities using
the interest method.

The Company's investment securities are held as available-for-sale, reported
at fair value with unrealized gains and losses reported as a separate
component of stockholders' equity. As the Company qualifies as a REIT and no
income taxes are paid, the unrealized gains and losses are reported gross in
stockholders' equity.

MORTGAGE LOANS HELD FOR INVESTMENT

The Company purchases certain non conforming mortgage loans to be held as
long-term investments. Mortgage loans held for investment are recorded at cost
at the date of purchase. Mortgage loans held for investment include various
types of adjustable-rate loans secured by mortgages on single-family
residential real estate properties and fixed-rate loans secured by second
trust deeds on single-family residential real estate properties, accounting
for 89% (unaudited) and 11% (unaudited), respectively, of the long-term
investment portfolio at March 31, 1996. At December 31, 1995 the Company had
no mortgage loans held for investment.

F-9

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Approximately 76.5% (unaudited) of the mortgage loans held for investment at
March 31, 1996 were collateralized by properties located in California.
Premiums and discounts and the market valuation related to these loans are
amortized over their estimated lives using the interest method. Loans are
continually evaluated for collectibility and, if appropriate, the loan may be
placed on nonaccrual status, generally 90 days past due, and previously
accrued interest reversed from income. As of March 31, 1996, there were no
loans on nonaccrual status and the Company had an allowance for loan losses of
$2.2 million (unaudited).

The Company maintains an allowance for losses on mortgage loans held for
investment at an amount which it believes is sufficient to provide adequate
protection against future losses in the mortgage loans portfolio. The
allowance for losses is determined primarily on the basis of management's
judgment of net loss potential, including specific allowances for known
impaired loans and other factors such as changes in the nature and volume of
the portfolio, value of the collateral and current economic conditions that
may affect the borrowers' ability to pay. A provision is recorded for all
loans or portions thereof deemed to be uncollectible thereby increasing the
allowance for loan losses.

FINANCE RECEIVABLES

Finance receivables represent transactions with customers, including ICIFC,
involving predominantly residential real estate lending. As a warehouse
lender, the Company is a secured creditor of the mortgage bankers and brokers
to which it extends credit and is subject to the risks inherent in that
status, including the risk of borrower default and bankruptcy. Any claim of
the Company as a secured lender in a bankruptcy proceeding may be subject to
adjustment and delay.

The Company maintains an allowance for losses on financing receivables at an
amount which it believes is sufficient to provide adequate protection against
future losses in the portfolio. The allowance for losses is determined
primarily on the basis of management's judgment of net loss potential,
including specific allowances for known impaired loans. A provision is
recorded for all accounts or portions thereof deemed to be uncollectible.

Finance receivables are stated at the principal balance outstanding.
Interest income is recorded on the accrual basis in accordance with the terms
of the loans. Finance receivables are continually evaluated for collectibility
and, if appropriate, the receivable is placed on non accrual status, generally
90 days past due. Future collections of interest income are included in
interest income or applied to the loan balance based on an assessment of the
likelihood that the loans will be repaid.

LEASE PAYMENT RECEIVABLES HELD FOR SALE

The Company's subordinated interest in lease receivables is collateralized
by liens on equipment. Revenue on the lease receivables is accrued as earned,
except where a reasonable doubt exists as to the collectibility of the related
principal, in which case the accrual of income is discontinued.

INCOME TAXES

IWLG did not record income taxes in its historical operations. The
accompanying consolidated financial statements reflect income taxes (benefit)
for IWLG as if it had been a separate subsidiary of SPTL for the period
January 1, 1995 through November 19, 1995 and the years ended December 31,
1994 and 1993. As a separate subsidiary of SPTL, IWLG would file a
consolidated Federal income tax return and a combined California franchise tax
return with ICII. ICII's income tax allocation policy for financial statement
purposes is to allocate income tax provision or benefit based on income (loss)
before income taxes (benefit) of each entity within its consolidated group,
adjusted for nontaxable or nondeductible items of income and expense. ICIFC's
taxable income is included in ICII's Federal and State income tax returns.
Post-Contribution, ICIFC will file its own tax return.

F-10

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Effective January 1, 1993, IWLG adopted SFAS 109, resulting in no material
adjustment to income. Prior to the Contribution Transaction, deferred tax
assets and liabilities were recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

IMH intends to operate so as to qualify as a real estate investment trust
(REIT) under the requirements of the Internal Revenue Code (the Code).
Requirements for qualification as a REIT include various restrictions on
ownership of IMH's stock, requirements concerning distribution of taxable
income and certain restrictions on the nature of assets and sources of income.
A REIT must distribute at least 95% of its taxable income to its stockholders,
the distribution of which 85% must be within the taxable year and the
remaining balance may extend until timely filing of its tax return in its
subsequent taxable year. Qualifying distributions of its taxable income are
deductible by a REIT in computing its taxable income. Although IMH did not
make any distributions during the calendar year of 1995, it can nevertheless
retain its qualified REIT status and eliminate its 1995 taxable income by
making a qualified distribution after the close of the 1995 taxable year in
accordance with the provisions of section 858 of the Code. IMH intends to and
has taken steps to satisfy the requirements of section 858 of the Code and to
elect to apply amounts out of its first distributions in calendar year 1995 to
effectively distribute 100% of its 1995 taxable income. The 1995 provision for
income taxes for IMH in the consolidated financial statements pertains to the
period prior to the Contribution Transaction. If in any tax year IMH should
not qualify as a REIT, it would be taxed as a corporation and distributions to
the stockholders would not be deductible in computing taxable income. If IMH
were to fail to qualify as a REIT in any tax year, it would not be permitted
to qualify for that year and the succeeding four years.

ADVERTISING

The Company accounts for its advertising costs as non-direct response
advertising. Accordingly, advertising costs are expensed as incurred.

NET INCOME PER SHARE

Net income per share is computed on the basis of the weighted average number
of shares outstanding for the year. The effect on the net income per share
resulting from dilution is not material during any period.

Pro forma net income per share as if all stock options and ICII ownership
interest in IMH were outstanding since January 1, 1993 and actual net income
per share for the three months ended March 31, 1996 and after the Offering for
the period from November 20, 1995 through December 31, 1995 is:

ACTUAL ACTUAL
FOR THE THREE NOVEMBER 20, PRO FORMA FOR
MONTHS ENDED 1995 THROUGH THE YEAR ENDED
MARCH 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995
------------- ------------ --------------
(UNAUDITED)

Weighted average shares outstand-
ing............................. 4,307,158 4,284,015 955,248
Net income....................... $1,693,639 $ 315,443 $2,058,375
Net income per share............. $ .39 $ .07 $ 2.16
========== ========= ==========

The 1994 and 1993 pro forma net income per share is not presented as the
information is not meaningful.

F-11

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

There were no dividends paid in 1995. An $0.08 cash dividend was paid on
January 30, 1996 (unaudited). A $0.39 cash dividend was paid on April 30, 1996
(unaudited).

RECLASSIFICATIONS

Certain items in prior periods have been reclassified to conform to the
current presentation.

MORTGAGE SERVICING RIGHTS

On May 12, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" ("SFAS 122"), as an amendment to SFAS 65. The Company elected to adopt
this standard for the year ended December 31, 1995. The impact on the Company
from adoption of SFAS 122 is only to the extent mortgage servicing rights are
recognized by ICIFC.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). This
statement establishes financial accounting standards for stock-based employee
compensation plans. SFAS 123 permits the Company to choose either the fair
value based method from SFAS 123 or intrinsic value based method of accounting
for its stock-based compensation arrangements under APB Opinion 25. SFAS 123
requires pro forma disclosures of net income and income per share computed as
if the fair value based method had been applied in financial statements of
companies that continue to follow current practice in accounting for such
arrangements under Opinion 25. SFAS 123 applies to all stock-based employee
compensation plans in which an employer grants shares of its stock or other
equity instruments to employees except for employee stock ownership plans.
SFAS 123 also applies to plans in which the employer incurs liabilities to
employees in amounts based on the price of the employer's stock, i.e., stock
option plans, stock purchase plans, restricted stock plans, and stock
appreciation rights. The statement also specifies the accounting for
transactions in which a company issues stock options or other equity
instruments for services provided by nonemployees or to acquire goods or
services from outside suppliers or vendors. The recognition provision of SFAS
123 for companies choosing to adopt the new fair value based method of
accounting for stock-based compensation arrangements may be adopted
immediately and will apply to all transactions entered into in fiscal years
that begin after December 15, 1995. The disclosure provisions of SFAS 123 are
effective for fiscal years beginning after December 15, 1995; however,
disclosure of the pro forma net income and income per share, as if the fair
value method of accounting for stock-based compensation had been elected, is
required for all awards granted in fiscal years beginning after December 31,
1994. The Company will continue to account for stock-based compensation under
APB Opinion 25 and, as a result, SFAS 123 will not have a material impact on
the Company's operations.

2. INVESTMENT SECURITIES AVAILABLE FOR SALE

The Company's mortgage-backed securities are secured by conventional, one-
to-four family mortgage loans. The yield to maturity on each security depends
on, among other things, the rate and timing of principal payments (including
prepayments, repurchases, defaults and liquidations), the pass-through rate
and interest rate fluctuations. The Company's interest in these securities is
subordinated so that, in the event of a loss, payments to senior certificate
holders will be made before the Company receives its payments.

F-12

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The amortized cost and estimated fair value of mortgage-backed securities
available-for-sale are summarized as follows:

MARCH 31, 1996
(UNAUDITED)
----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAIN LOSS FAIR VALUE
----------- ---------- ---------- -----------

Donaldson, Lufkin and Jenrette
Series:
1995-Q6, Class B-1............ $ 6,584,972 -- $ (147,645) $ 6,437,327
1995-4, Class B-1............. 3,828,628 -- (150,567) 3,678,061
1995-4, Class B-2............. 1,661,480 -- (65,894) 1,595,586
Salomon Brothers
Series VII 95-A, Class B-2..... 5,409,551 114,326 -- 5,523,877
Bear Stearns Mortgage Securi-
ties, Inc. 1996-1 XI........... 8,512,711 58,230 -- 8,570,941
----------- -------- ---------- -----------
$25,997,342 $172,556 $ (364,106) $25,805,792
=========== ======== ========== ===========

DECEMBER 31, 1995
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAIN LOSS FAIR VALUE
----------- ---------- ---------- -----------

Donaldson, Lufkin and Jenrette
Series:
1995-Q6, Class B-1............. $ 6,585,440 -- $(36,496) $ 6,548,944
1995-4, Class B-1.............. 3,793,799 -- (7,962) 3,785,837
1995-4, Class B-2.............. 1,641,124 -- (4,321) 1,636,803
Salomon Brothers Series VII 95-A,
Class B-2....................... 5,450,538 -- (43,884) 5,406,654
----------- -------- -------- -----------
$17,470,901 -- $(92,663) $17,378,238
=========== ======== ======== ===========

The Company purchased two of its mortgage-backed securities from SPTL in
December 1995 (see note 9).

The Company holds other securities available-for-sale with estimated fair
values as follows:

MARCH 31, 1996
(UNAUDITED)
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAIN LOSS FAIR VALUE
----------- ---------- ---------- -----------

Imperial Credit Industries, Inc.
9 3/4% Senior Notes............. $ 4,500,000 $125,000 $ -- $ 4,625,000
Franchise Loan Receivables Trust
1995-B.......................... 2,812,091 -- -- 2,812,091
----------- -------- -------- -----------
$ 7,312,091 $125,000 $ -- $ 7,437,091
=========== ======== ======== ===========

The equity in the Franchise Loans Receivables Trust 1995-B was purchased from
ICII in the first quarter of 1996 (unaudited).

3. MORTGAGE LOANS HELD FOR INVESTMENT

Mortgage loans held for investment consist of the following:

AT MARCH 31,
1996
------------
(UNAUDITED)

Loans secured by single-family residential real estate
properties............................................... $309,816,250
Premiums on loans........................................ 3,934,698
Allowance for loan losses................................ (2,290,000)
------------
$311,460,948
============

F-13

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

There were no mortgage loans held for investment at December 31, 1995.

The allowance for loan loss activity for the three months ended March 31,
1996 consisted only of a provision. There were no charge-offs or recoveries
during that period (unaudited).

4. FINANCE RECEIVABLES

The Company's finance receivables represent warehouse lines of credit with
mortgage banking companies collateralized by mortgage loans on single family
residences. Because of the concentration of mortgage loans underlying the
Company's finance receivables located in California, which was 63% at December
31, 1995, a significant decline in regional economic conditions, or some other
regional catastrophe, could result in mortgage banking companies being unable
to sell mortgage loans and the Company suffering losses on their warehouse
lines or in fewer mortgage loans available for warehouse lending by the
Company and ultimately a decline in interest income and fee income. No other
significant concentrations existed at December 31, 1995.

Finance receivables consist of the following:

AT DECEMBER 31,
AT MARCH 31, ------------------------
1996 1995 1994
------------ ------------ ----------
(UNAUDITED)

Due from ICIFC...................... $173,407,629 $550,290,862 $ --
Due from other mortgage banking
companies.......................... 22,882,931 32,730,251 3,119,814
------------ ------------ ----------
196,290,560 583,021,113 3,119,814
Allowance for finance receivable
losses............................. (225,000) (100,000) (95,374)
------------ ------------ ----------
$196,065,560 $582,921,113 $3,024,440
============ ============ ==========

The Company earns interest rates at prime (8.5% at December 31, 1995) on
warehouse lines to ICIFC and prime plus one-half to two percent on its
warehouse lines to other mortgage banking companies. These lines have
maturities which range from on demand to one year and are generally
collateralized by mortgages on single family residences.

Activity in the allowance for finance receivable losses for the year ended
December 31 was as follows:

FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED DECEMBER
MARCH 31, 31,
----------------- ------------------
1996 1995 1995 1994
-------- -------- --------- -------
(UNAUDITED)

Balance, beginning of period........... $100,000 $ 95,374 $ 95,374 $ --
Provision for finance receivable
losses................................ 125,000 104,152 487,505 95,374
Charge-offs............................ -- -- (482,879) --
-------- -------- --------- -------
Balance, end of period................. $225,000 $199,526 $ 100,000 $95,374
======== ======== ========= =======

The charge-offs reflected in the above table were recorded prior to the
effective date of the Initial Public Offering and are related to one borrower.

There was no allowance for finance receivable losses in 1993.

F-14

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. REVERSE-REPURCHASE AGREEMENTS

IMH enters into reverse-repurchase agreements with major brokerage firms for
its mortgage warehouse lending operations and to fund the purchase of mortgage
loans and mortgage-backed securities. Mortgage loans underlying certain of the
agreements are delivered to the dealers that arrange the transactions. The
following tables present information regarding reverse-repurchase agreements:

MARCH 31, 1996 (UNAUDITED)
----------------------------------------
REVERSE
REPURCHASE UNDERLYING
UNDERLYING COLLATERAL LIABILITY COLLATERAL MATURITY DATE
--------------------- ------------ ------------ --------------

Paine Webber:
Mortgage loans.................. $309,695,709 $310,019,647 July 30, 1996
Merrill Lynch:
Mortgage loans.................. 199,812,859 200,021,861 April 30, 1996
Salomon Brothers:
MBS Salomon 1995-A.............. 4,951,000 5,523,877 April 4, 1996
Donaldson, Lufkin and Jenrette
(DLJ):
MBS DLJ:
1995-4 B-1.................... 1,839,000 3,678,061 April 29, 1996
1995-4 B-2.................... 798,000 1,595,586 April 29, 1996
1995-Q6 B-1................... 5,149,000 6,437,327 April 15, 1996
------------ ------------
7,786,000 11,710,974
Bear Stearns:
MBS Bear Stearns 1996-1 X1...... 6,500,000 8,570,941 April 1, 1996
------------ ------------
Total....................... $528,745,568 $535,847,300
============ ============

DECEMBER 31, 1995
------------------------------------------
REVERSE
REPURCHASE UNDERLYING
UNDERLYING COLLATERAL LIABILITY COLLATERAL MATURITY DATE
--------------------- ------------ ------------ ----------------

Paine Webber:
Mortgage loans.................. $239,628,464 $251,423,244 January 8, 1996
Merrill Lynch:
Mortgage loans.................. 323,180,005 332,660,022 January 25, 1996
Salomon Brothers:
MBS Salomon 1995-A.............. 4,918,892 5,406,654 January 5, 1996
------------ ------------
Total....................... $567,727,361 $589,489,920
============ ============

There were no reverse-repurchase agreements at December 31, 1994.

At March 31, 1996 (unaudited) and December 31, 1995, reverse-repurchase
liability includes accrued interest payable of $1,085,792 and $1,075,511,
respectively.

The following table presents certain information on reverse-repurchase
agreements, excluding accrued interest payable:

MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)

Maximum Month-End Outstanding Balance............ $634,209,986 $566,651,850
Average Balance Outstanding...................... 571,018,235 16,343,476
Weighted Average Rate............................ 6.31% 6.83%

F-15

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The maximum amount available under the reverse-repurchase agreement at March
31, 1996 (unaudited) and December 31, 1995 is $623 million.

6. INCOME TAXES

The Company, as a qualified REIT for the period from November 20, 1995 to
December 31, 1995 is not subject to income taxes. The Company's income taxes
(benefit) for the periods it was not a REIT follow:

1995 1994 1993
------- -------- --------

Current:
Federal........................................ $36,951 $(10,775) $177,135
State.......................................... 2,054 2,555 57,978
------- -------- --------
Total current................................ 39,005 (8,220) 235,113
------- -------- --------
Deferred:
Federal........................................ 26,257 (11,602) (1,712)
State.......................................... 10,587 (10,273) 0
------- -------- --------
Total deferred............................... 36,844 (21,875) (1,712)
------- -------- --------
Total income taxes (benefit)..................... $75,849 $(30,095) $233,401
======= ======== ========

The income tax provision prior to the formation of IMH as a REIT differs
from statutory Federal corporate income tax rate primarily due to state income
taxes and equity in earnings of ICIFC.

Deferred income taxes arise from differences in the bases of assets and
liabilities for tax and financial reporting purposes. The following table
shows the primary components of the IWLG's net deferred taxes at December 31,
1994:

Deferred tax assets:
Allowance for finance receivable losses........................ $40,057
Other.......................................................... 3,597
-------
Total........................................................ 43,654
Valuation allowance............................................ --
-------
Deferred tax assets, net of valuation allowance................ 43,654
Deferred tax liabilities:
State taxes.................................................... (2,701)
-------
Total........................................................ (2,701)
-------
Net deferred tax assets (included in borrowings from SPTL)....... $40,953
=======

The Company had no deferred taxes at December 31, 1995.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Management considers the scheduled reversal
of deferred tax liabilities and available tax carrybacks in making this
assessment. Based upon the schedule of reversals and available tax carrybacks,
management believes it is more likely than not the Company will realize the
benefits of the deferred tax assets. All deferred tax balances were
transferred to ICII on November 20, 1995 as part of the Contribution
Transaction.

F-16

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments as of December 31, 1995 is made in accordance with the
requirements of Statement of Financial Accounting Standards (SFAS) No. 107,
Disclosures About Fair Value of Financial Instruments, and SFAS No. 119,
Disclosures About Derivative Financial Instruments and Fair Value of Financial
Instruments. The estimated fair value amounts have been determined by IMH
using available market information and appropriate valuation methodologies;
however, considerable judgment is necessarily required to interpret market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts IMH could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated
fair value amounts.

DECEMBER 31, 1995
-------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
(IN THOUSANDS)

Assets:
Cash and cash equivalents............................. $ 2,284 $ 2,284
Investment securities available-for-sale.............. 17,378 17,378
Finance receivables................................... 582,921 582,921
Lease payment receivables held for sale............... 8,441 8,441
Liabilities:
Reverse-repurchase agreements, net of accrued
interest............................................. 566,652 566,652
Off balance-sheet unrealized gains (losses):
Short-term commitments
to extend credit................................... -- --

The fair value estimates as of December 31, 1995 are based on pertinent
information available to management as of that date. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since those dates and, therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.

The following describes the methods and assumptions used by IMH in
estimating fair values.

CASH AND CASH EQUIVALENTS

The carrying amount for cash and cash equivalents approximates fair value
because these instruments are demand deposits and money market mutual funds
and do not present unanticipated interest rate or credit concerns.

INVESTMENT SECURITIES AVAILABLE FOR SALE

The fair value of investment securities is estimated based on quoted market
prices from dealers and brokers for similar types of mortgage-backed
securities.

FINANCE RECEIVABLES

The fair value approximates the carrying amounts because of the short-term
nature of the assets and do not present unanticipated interest rate or credit
concerns.

F-17

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

LEASE PAYMENT RECEIVABLES HELD FOR SALE

The fair value is estimated by discounting future cash flows using credit
and discount rates the Company believes reflect the estimated credit, interest
rate and prepayment risks associated with similar types of instruments.

REVERSE-REPURCHASE AGREEMENTS

Fair values approximate the carrying amounts because of the short-term
maturity of the liabilities and do not present unanticipated interest rate or
credit concerns.

SHORT-TERM COMMITMENTS TO EXTEND CREDIT

There are no commitment fees associated with IMH's lines of credit extended
under the warehouse lending program. Accordingly, these commitments do not
have an estimated fair value.

8. EMPLOYEE BENEFIT PLANS

PROFIT SHARING AND 401(K) PLAN

Prior to July 1, 1993, Imperial Bancorp (the primary shareholder of ICII)
had a noncontributory profit sharing plan in which employees of the Company
were eligible to participate at year end if they had been employed for at
least 1,000 hours during the year. For 1993, there was no contribution charged
to operations.

Imperial Bancorp also had a 401(k) plan in which all employees of the
Company had been eligible to participate. On July 1, 1993, ICII terminated its
participation in Imperial Bancorp's 401(k) and profit sharing plans,
establishing its own 401(k) plan (the Plan) in which employees of the Company
were eligible to participate. On September 30, 1993, Imperial Bancorp
transferred all plan assets to ICII.

Under ICII's 401(k) plan, employees of the Company may contribute up to 14%
of their salaries. The Company will match 50% of the first 4% of employee
contributions. An additional Company contribution may be made at the
discretion of the Company.

The Company does not have its own 401(K) or profit sharing plan. As such,
employees of the Company participate in ICII's 401(K) plan. The Company's
matching and discretionary contributions were not significant for any period
presented.

9. RELATED PARTY TRANSACTIONS

RELATED PARTY COST ALLOCATIONS AND CHARGES

Prior to the Contribution Transaction, IWLG was allocated various costs from
SPTL and charged for certain ICII services. The costs of these services were
not directly attributable to IWLG and primarily include general corporate
overhead such as human resources, data processing, professional services,
telephone and other communications, and general and administrative expense
including a fixed asset user charge. These expenses were allocated or charged
based typically on a per employee basis, which management believes is
reasonable. Total related party allocations and charges for the period January
1, 1995 through November 19, 1995, for the three months ended March 31, 1995
(unaudited) and for the years ended December 31, 1994, and 1993 were $46,865,
$9,465, $56,128 and $52,739, respectively.

F-18

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Interest income recorded by the Company, related to finance receivables due
from ICIFC, was $11,219,048 and $1,348,424 for the three months ended March
31, 1996 (unaudited) and for the year ended December 31, 1995.

On the effective date of the Initial Public Offering, IMH entered into a
services agreement with ICII under which ICII provides various services to the
Company, including data processing, human resource administration, general
ledger accounts, check processing, remittance processing and payment of
accounts payable. ICII charges fees for each of the services based upon usage.
As part of the services provided, ICII provides IWLG with insurance coverage
and self insurance programs, including health insurance. The charge to IWLG
for coverage is based upon a pro rata portion of the costs to ICII for its
various policies. Total charges for the three months ended March 31, 1996
(unaudited) and for the period November 20, 1995 through December 31, 1995
were $17,767 and $4,462, respectively.

CASH

Prior to the Contribution Transaction, IWLG had no cash accounts. All
operations were funded directly by SPTL. Adjustments were made to IWLG's
financial statements to reflect these fundings as borrowings from SPTL. IWLG
did not reflect any accounts receivable or payable on its balance sheet prior
to the Contribution Transaction because all transactions of IWLG either
increased or decreased its borrowings from SPTL.

PURCHASE OF MORTGAGE-BACKED SECURITIES

On December 29, 1995, the Company purchased, at market value, from SPTL, DLJ
Mortgage Acceptance Corp. Pass-Through Certificates Series 1995-4, Class B-1
and Class B-2 issued August 29, 1995. These certificates consist primarily of
a pool of certain conventional, 11th district cost of funds adjustable rate,
one-to-four family, first lien mortgage loans, with terms to maturity of not
more than 30 years. The mortgage loans underlying the certificates were
originated or acquired by ICII. All of the mortgage loans were serviced by
ICII in its capacity as master servicer at December 31, 1995. ICII sold the
servicing related to these mortgage loans to an unrelated third party during
the first quarter of 1996 (unaudited).

The Company purchased the Class B-1 certificates having a current
certificate principal balance of $4,822,722 and the Class B-2 certificates
having a current certificate principal balance of $2,338,290 for a price of
78.54 and 70.01, respectively, equating to a discount of $1,028,923 and
$697,166, respectively.

PURCHASE OF BULK MORTGAGE LOANS (UNAUDITED)

On March 29, 1996, IMH purchased from ICIFC bulk mortgage loan packages of
30-year fully amortizing six-month adjustable LIBOR and 15-year fixed rate
second trust deed mortgages having a principal balance of $276,273,072 and
$34,725,305 with premiums paid of $2,762,731 and $1,171,979, respectively.
Servicing rights on all mortgage loans were retained by ICIFC.

PURCHASE OF SUBORDINATED LEASE RECEIVABLES

On December 29, 1995, IMH purchased a subordinated interest in a lease
receivable securitization from Imperial Business Credit, Inc. (IBC) a wholly-
owned subsidiary of ICII. The lease receivables underlying the security were
originated by IBC. IMH purchased the subordinated lease receivable at the
present value of estimated cash flows based on a discount rate of 12%
amounting to a purchase price of $8,440,644.

NON-COMPETE AGREEMENT AND RIGHT OF FIRST REFUSAL AGREEMENT

Pursuant to the Non-Compete Agreement, ICII and any entity of which ICII
owns more than 25% of the voting securities (a 25% entity) may not compete
with the Company's Warehouse Lending Operations and may not establish a
network of third party correspondent loan originators or another end-investor
in non-conforming mortgage loans. The agreement expires two years from the
effective date of the Initial Public Offering.

F-19

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Pursuant to the Right of First Refusal Agreement, ICII granted ICIFC a right
of first refusal to purchase all non-conforming mortgage loans that ICII or
any 25% entity originates or acquires and subsequently offers for sale and
ICIFC granted ICII, or any 25% entity designated by ICII, a right of first
refusal to purchase all non-conforming mortgage loans that ICIFC acquires and
subsequently offers for sale. In addition, for a period of the earlier of nine
months from the effective date of the Initial Public Offering and that date
upon which IMH accumulates $300 million of mortgage loans and/or mortgage-
backed securities, neither ICII nor any 25% entity will be permitted to
purchase any non-conforming bulk loan package having a principal balance of
$50 million or more without first allowing ICIFC the opportunity to bid to
purchase said package. Additional related party transactions are described
elsewhere in the financial statement footnotes.

10. COMMITMENTS AND CONTINGENCIES

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

IMH is a party to financial instruments with off-balance-sheet risk in the
normal course of business. Such instruments include short-term commitments to
extend credit to borrowers under warehouse lines of credit which involve
elements of credit risk. In addition, IMH is exposed to credit loss in the
event of nonperformance by the counterparties to the various agreements
associated with loan purchases. However, IMH does not anticipate
nonperformance by such borrowers or counterparties. Unless noted otherwise,
IMH does not require collateral or other security to support such commitments.

The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. The
contract or notional amounts of forward contracts do not represent exposure to
credit loss. The Company controls the credit risk of its forward contracts
through credit approvals, limits and monitoring procedures.

LEASE COMMITMENTS

Minimum rental commitments under a noncancelable premises operating sub-
lease with ICII at December 31, 1995 were as follows:

1996........................................................... $ 163,200
1997........................................................... 170,200
1998........................................................... 171,600
1999........................................................... 174,400
2000........................................................... 180,000
Thereafter..................................................... 180,000
----------
Total........................................................ $1,039,400
==========

The sublease is for the period from December 1, 1995 through January 1, 2002
and calls for rent to be paid based on what ICII pays according to its master
lease agreement.

Rent expense for the three months ended March 31, 1996 and 1995 (unaudited)
and for the years ended December 31, 1995, 1994, and 1993, was $1,095, $1,026,
$9,405, and $19,611, and $24,504, respectively. Rent expense is allocated to
ICIFC based on number of employees.

LOAN COMMITMENTS

IWLG's warehouse lending program provides secured short-term revolving
financing to small- and medium-size mortgage originators and ICIFC to finance
mortgage loans from the closing of the loans until sold to permanent
investors. As of December 31, 1995, the Company had extended 11 committed
lines of credit in the aggregate principal amount of approximately $640
million, of which $583 million was outstanding.

F-20

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

LEGAL PROCEEDINGS

ComUnity National Asset Corporation, a Maryland corporation v. Thomas O.
Markel, Jr., an individual, Homemac Mortgage Bankers, a business association
of unknown form; Homemac Corporation, a California corporation; Homemac
Finance Corporation; Homemac Institutional Mortgage Corporation, a California
corporation; Imperial Credit Mortgage Holdings, Inc., a Maryland corporation;
and DOES 1 through 100, inclusive, Orange County Superior Court Case No.
761786.

ComUnity seeks damages in an unspecified amount, but in no event less than
$200,000, alleging that said amount is in no event less than the amount spent
and/or obligations incurred by ComUnity in setting up its business and
organizational plan for IMH to become a REIT dealing primarily in B and C
grade mortgage loans and to take ComUnity public in an initial public
offering, together with punitive damages. Also, ComUnity alleges that IMH
wrongfully received consideration in the form of, among other things, reduced
expenses and legal fees, salary, wages, stock options, and other forms of
consideration arising out of the commercial exploitation of ComUnity's
confidential information, and that ComUnity is entitled to an order of
restitution compelling IMH and other defendants to pay to ComUnity all profits
from the Commerical exploitation of information allegedly received from
ComUnity. The Company believes that the complaint is without merit and intends
to vigorously defend the action.

The Company is involved in additional litigation arising in the normal
course of business of which management believes based in part upon the advice
of legal counsel, will not have a material effect on the Company.

11. MANAGEMENT CONTRACT

On the effective date of the Offering, the Company entered into an agreement
with Imperial Credit Advisors, Inc. (ICAI) for an initial term of one year, to
provide management services to the Company. These services include the
purchase, financing, servicing and administration of mortgage loans and
mortgage loan securities.

As manager of the Company, ICAI receives a per annum base management fee
payable monthly in arrears of an amount equal to (1) 3/8 of 1% of Gross
Mortgage Assets of IMH comprised of other than Agency Certificates, conforming
mortgage loans or mortgage-backed securities secured by or representing
interests in conforming mortgage loans, plus (2) 1/8 of 1% of the remainder of
Gross Mortgage Assets of IMH plus (3) 1/5 of 1% of the average daily asset
balance of the outstanding amounts under IWLG's warehouse lending facilities.
An advisory fee of $297,522 and $37,888 was paid for the three months ended
March 31, 1996 (unaudited) and for the year ended December 31, 1995,
respectively.

As incentive compensation, ICAI will be entitled to receive for each fiscal
quarter, an amount equal to 25% of the net income of the Company, before
deduction of such incentive compensation, in excess of the amount that would
produce an annualized Return on Equity equal to the daily average Ten Year
U.S. Treasury Rate plus 2%. The Company's incentive compensation calculation
will be made quarterly in arrears before any income distributions are made to
stockholders for the corresponding period. Incentive compensation of $128,700
was accrued for the three months ended March 31, 1996 (unaudited). No
incentive compensation was accrued for the period November 20, 1995 through
December 31, 1995.

Concurrent with the management agreement, ICAI entered into a submanagement
agreement with ICII for ICII to perform such management services for the
Company as ICAI deems necessary.

F-21

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. STOCK OPTION PLAN/EXECUTIVE COMPENSATION

In August, 1995 the Company adopted a Stock Option, Deferred Stock and
Restricted Stock Plan (the Stock Option Plan) which provides for the grant of
qualified incentive stock options (ISOs), options not qualified (NQSOs) and
deferred stock, restricted stock, stock appreciation, dividend equivalent
rights and limited stock appreciation rights awards (Awards). The Stock Option
Plan is administered by a committee of directors appointed by the Board of
Directors and is composed solely of "disinterested persons." ISOs may be
granted to the officers and key employees of the Company. NQSOs and Awards may
be granted to the directors, officers and key employees of the Company or any
of its subsidiaries, to the directors, officers and key employees of ICIFC. At
December 31, 1995, shares reserved for issuance pursuant to the Company's
Stock Option Plan were 400,000.

The exercise price for any NQSO or ISO granted under the Stock Option Plan
may not be less than 100% (or 110% in the case of ISOs granted to an employee
who is deemed to own in excess of 10% of the outstanding Common Stock) of the
fair market value of the shares of Common Stock at the time the NQSO or ISO is
granted.

Under the Stock Option Plan, the Company may make loans available to stock
option holders in connection with the exercise of stock options granted under
the Stock Option Plan. If shares of Common Stock are pledged as collateral for
such indebtedness, the shares may be returned to the Company in satisfaction
of the indebtedness. If returned, the shares become available for issuance in
connection with future stock options and Awards under the Stock Option Plan.

Unless previously terminated by the Board of Directors, the Stock Option
Plan will terminate in August of 2005. Options granted under the Stock Option
Plan will become exercisable as directed by a committee of the Board of
Directors at the time of grant.

A summary of stock options outstanding at December 31, 1995 follows:

NUMBER OF EXERCISE
SHARES PRICE DATE OF GRANT
--------- -------- -----------------

Officers of IMH......................... 220,000 $11.25 August 30, 1995
Officers of ICAI........................ 55,000 11.25 August 30, 1995
Unaffiliated directors.................. 45,000 13.00 November 20, 1995
-------
320,000
=======

No shares were exercisable at December 31, 1995.

The 220,000 and 55,000 stock options become exercisable three years from the
date of grant and expire seven years from the date they become exercisable.
The 45,000 stock options become exercisable on the first anniversary of the
date of grant and expire nine years from the date they become exercisable.

On January 31, 1996, 25,000 of the 220,000 stock options were canceled.

13. STOCKHOLDERS' EQUITY

On November 20, 1995, the Company completed its initial public offering of
3,750,000 shares of common stock. The Company raised $44,493,294 in the
offering net of $4,256,706 of offering expenses. The Company intends to
distribute 95% or more of its net taxable income (which does not necessarily
equal net income as calculated in accordance with GAAP) to its common
stockholders each year so as to comply with the REIT provisions of the
Internal Revenue Code. Holders of the common stock are entitled to such
dividends as the Company's Board of Directors, in its discretion, may declare
out of funds available. In the event of liquidation

F-22

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

of the Company, holders of common stock are entitled to receive, pro rata, all
of the assets of the Company available for distribution. Holders of the common
stock have no conversion or preemptive or other subscription rights and there
are no redemption or sinking fund provisions applicable to the common stock.
At December 31, 1995, 50 million shares of common stock are authorized and
4,250,000 shares are issued and outstanding.

The Company is authorized to issue shares of preferred stock designated in
one or more classes or series. The preferred stock may be issued from time to
time with such designations, rights and preferences as shall be determined by
the Board of Directors. The preferred stock, if issued, may have a preference
on dividend payments which could affect the ability of the Company to make
dividend distributions to the common stockholders. As of December 31, 1995, 10
million shares of preferred stock are authorized and no shares have been
issued or are outstanding.

14. SUBSEQUENT EVENTS (UNAUDITED)

On April 16, 1996, the Board of Directors declared a $0.39 cash dividend,
all to be taxable as ordinary income, to be paid on April 30, 1996 to
stockholders of record on April 24, 1996.

During the second quarter of 1996, the Company completed a $296.3 million
CMO financing.

14. ICI FUNDING CORPORATION

The following condensed financial information summarizes the financial
condition, results of operations and cash flows of ICI Funding Corporation:

BALANCE SHEETS

DECEMBER 31,
MARCH 31, -------------------------
1996 1995 1994
------------ ------------ -----------
(UNAUDITED)

ASSETS
Cash.................................... $ -- $ 2,184,344 $ --
Mortgage loans held for sale............ 179,630,533 544,274,962 --
Accrued interest receivable............. 763,352 2,984,867 --
Due from affiliates..................... 4,472,461 2,541,743 --
Mortgage servicing rights............... 2,656,626 -- 11,453,240
Premises and equipment, net............. 490,000 516,250 643,971
Other assets............................ 92,779 129,205 --
------------ ------------ -----------
$188,105,751 $552,631,371 $12,097,211
============ ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings from IWLG.................... $173,407,629 $550,290,862 $ --
Borrowings from ICII.................... -- -- 5,698,162
Accrued interest expense................ 2,894,545 1,348,424 --
Other liabilities....................... 1,827,583 117,500 --
Due to affiliate........................ 343,784 -- --
------------ ------------ -----------
Total liabilities..................... 178,473,541 551,756,786 5,698,162
------------ ------------ -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock....................... 9,142,650 1,014,750 --
Common stock.......................... 92,350 10,250 --
Contributed capital................... -- -- 361,170
Retained earnings (accumulated
deficit)............................. 397,210 (150,415) 6,037,879
------------ ------------ -----------
Total shareholders' equity.......... 9,632,210 874,585 6,399,049
------------ ------------ -----------
$188,105,751 $552,631,371 $12,097,211
============ ============ ===========

F-23

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

STATEMENT OF OPERATIONS

THREE MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -------------------------------------
1996 1995 1995 1994 1993
----------- ---------- ----------- ----------- -----------
(UNAUDITED)

Revenues:
Gain on sale of loans. $ 2,613,620 $ 729,922 $ 4,135,373 $ 2,291,143 $ 5,859,378
Interest income....... 11,119,272 -- 1,249,000 -- --
Loan servicing income. 31,708 1,332,928 5,158,812 4,042,798 1,377,247
Gain on sale of
servicing rights..... -- 369,703 369,703 4,188,282 5,332,026
----------- ---------- ----------- ----------- -----------
13,764,600 2,432,553 10,912,888 10,522,223 12,568,651
----------- ---------- ----------- ----------- -----------
Expenses:
Interest on borrowings
from IWLG............ 11,219,048 -- 1,348,424 -- --
Other General and
administrative....... 1,200,017 1,132,498 3,662,080 6,332,479 4,507,534
Provision for loan
losses............... 400,000 -- -- 655,294 175,000
Amortization of
mortgage servicing
rights............... 14,319 447,650 2,892,341 2,070,387 459,233
Interest on borrowings
from ICII............ -- 149,259 436,668 538,100 126,814
----------- ---------- ----------- ----------- -----------
12,833,384 1,729,407 8,339,513 9,596,260 5,268,581
----------- ---------- ----------- ----------- -----------
Income before income
taxes.................. 931,216 703,146 2,573,375 925,963 7,300,070
Income taxes............ (383,591) (295,321) (1,069,056) (388,904) (3,066,029)
----------- ---------- ----------- ----------- -----------
Net income.......... $ 547,625 $ 407,825 $ 1,504,319 $ 537,059 $ 4,234,041
=========== ========== =========== =========== ===========

F-24

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------
1996 1995 1995 1994 1993
------------- ----------- ------------- ----------- ------------
(UNAUDITED)

Cash flows from
operating activities:
Net income............ $ 547,625 $ 407,825 $ 1,504,319 $ 537,059 $ 4,234,041
Adjustments to
reconcile net income
to net cash provided
by (used in)
operating activities:
Provision for loan
losses.............. 400,000 -- -- 655,294 175,000
Depreciation and
amortization........ 40,569 487,328 2,911,752 2,219,262 518,789
Gain on sale of
servicing rights.... -- (369,703) (369,703) (4,188,282) (5,332,026)
Net change in mortgage
loans held for sale.. 364,244,429 -- (544,274,962) -- --
Net change in other
assets and
liabilities.......... 3,927,211 -- (4,189,891) -- --
------------- ----------- ------------- ----------- ------------
Net cash provided by
(used in) operating
activities........... 369,159,834 525,450 (544,418,485) (776,667) (404,196)
------------- ----------- ------------- ----------- ------------
Cash flows from
investing activities:
Proceeds from sale of
servicing rights..... -- 915,106 1,250,092 8,996,662 7,757,268
Purchase of servicing
rights............... (2,670,945) (1,155,334) (3,865,605) (8,781,244) (12,435,238)
Purchases of premises
and equipment........ -- -- -- (433,199) (419,203)
Advances on loans held
for investment....... -- -- -- (408,054) (284,780)
------------- ----------- ------------- ----------- ------------
Net cash used in
investing
activities.......... (2,670,945) (240,228) (2,615,513) (625,835) (5,381,953)
------------- ----------- ------------- ----------- ------------
Cash flows from
financing activities:
Net change in
borrowings........... (376,883,233) (285,222) 548,718,342 1,041,332 5,786,149
Capital contributions. 8,210,000 -- 500,000 361,170 --
------------- ----------- ------------- ----------- ------------
Net cash (used in)
provided by
financing
activities.......... (368,673,233) (285,222) 549,218,342 1,402,502 5,786,149
------------- ----------- ------------- ----------- ------------
Net change in cash...... (2,184,344) -- 2,184,344 -- --
Cash at beginning of
period................. 2,184,344 -- -- -- --
------------- ----------- ------------- ----------- ------------
Cash at end of period... $ -- $ -- $ 2,184,344 $ -- $ --
============= =========== ============= =========== ============
Supplementary
information:
Interest paid......... $ 9,672,927 $ 149,259 $ 1,785,092 $ 538,100 $ 126,814
Taxes paid............ 383,591 295,321 1,069,056 388,904 3,066,029
============= =========== ============= =========== ============
Non-cash transactions:
Contribution
Transaction on
November 20, 1995 net
assets reverted to
ICII:
Premises and
equipment........... $ -- $ -- $ 498,486 $ -- $ --
Mortgage servicing
rights.............. -- -- 11,680,939 -- --
Borrowings from ICII. -- -- 4,125,642 -- --
Contributed capital.. -- -- 361,170 -- --
Retained earnings.... -- -- 7,692,613 -- --

F-25

INDEPENDENT AUDITORS' REPORT

The Board of Directors
ICI Funding Corporation:

We have audited the accompanying balance sheets of ICI Funding Corporation as
of December 31, 1995 and 1994, and the related statements of operations,
changes in shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ICI Funding Corporation as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995
in conformity with generally accepted accounting principles.

As discussed in note 1 to the financial statements, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 122, "Accounting
for Mortgage Servicing Rights" for the year ended December 31, 1995.

KPMG Peat Marwick LLP

Orange County, California
January 25, 1996

F-26

ICI FUNDING CORPORATION

BALANCE SHEETS

DECEMBER 31,
MARCH 31, -------------------------
1996 1995 1994
------------ ------------ -----------
(UNAUDITED)

ASSETS
Cash.................................... $ -- $ 2,184,344 $ --
Mortgage loans held for sale............ 179,630,533 544,274,962 --
Accrued interest receivable............. 763,352 2,984,867 --
Due from affiliates..................... 4,472,461 2,541,743 --
Mortgage servicing rights............... 2,656,626 -- 11,453,240
Premises and equipment, net............. 490,000 516,250 643,971
Other assets............................ 92,779 129,205 --
------------ ------------ -----------
$188,105,751 $552,631,371 $12,097,211
============ ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings from IWLG.................... $173,407,629 $550,290,862 $ --
Borrowings from ICII.................... -- -- 5,698,162
Accrued interest expense................ 2,894,545 1,348,424
Other liabilities....................... 1,827,583 117,500 --
Due to affiliate........................ 343,784 -- --
------------ ------------ -----------
Total liabilities..................... 178,473,541 551,756,786 5,698,162
------------ ------------ -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 10,000
shares authorized; 10,000 shares
issued and outstanding at March 31,
1996 (unaudited) and at December 31,
1995 and none issued and outstanding
at December 31, 1994................. 9,142,650 1,014,750 --
Common stock, no par value; 10,000
shares authorized; 10,000 shares
issued and outstanding at March 31,
1996 (unaudited) and at December 31,
1995 and none issued and outstanding
at December 31, 1994................. 92,350 10,250 --
Contributed capital................... -- -- 361,170
Retained earnings (accumulated
deficit)............................. 397,210 (150,415) 6,037,879
------------ ------------ -----------
Total shareholders' equity.......... 9,632,210 874,585 6,399,049
------------ ------------ -----------
$188,105,751 $552,631,371 $12,097,211
============ ============ ===========

See accompanying notes to financial statements.

F-27

ICI FUNDING CORPORATION

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
----------------------- -------------------------------------
1996 1995 1995 1994 1993
----------- ---------- ----------- ----------- -----------
(UNAUDITED)

Revenues:
Interest income....... $11,119,272 $ -- $ 1,249,000 $ -- $ --
Gain on sale of loans. 2,613,620 729,922 4,135,373 2,291,143 5,859,378
Loan servicing income. 31,708 1,332,928 5,158,812 4,042,798 1,377,247
Gain on sale of
servicing rights..... -- 369,703 369,703 4,188,282 5,332,026
----------- ---------- ----------- ----------- -----------
13,764,600 2,432,553 10,912,888 10,522,223 12,568,651
----------- ---------- ----------- ----------- -----------
Expenses:
Interest on borrowings
from IWLG............ 11,219,048 -- 1,348,424 -- --
Personnel expense..... 834,791 517,875 1,592,282 2,958,534 2,522,271
Provision for loan
losses............... 400,000 -- -- 655,294 175,000
Other general and
administrative....... 134,210 461,032 1,539,942 2,611,567 1,466,119
Professional services. 116,511 45,781 203,593 118,979 146,947
Occupancy expense..... 49,114 53,637 149,825 296,215 193,226
Data processing
expense.............. 36,286 29,314 89,223 154,621 81,670
Telephone and other
communications....... 29,105 24,859 87,215 192,563 97,301
Amortization of
mortgage servicing
rights............... 14,319 447,650 2,892,341 2,070,387 459,233
Interest on borrowings
from ICII............ -- 149,259 436,668 538,100 126,814
----------- ---------- ----------- ----------- -----------
12,833,384 1,729,407 8,339,513 9,596,260 5,268,581
----------- ---------- ----------- ----------- -----------
Income before income
taxes.................. 931,216 703,146 2,573,375 925,963 7,300,070
Income taxes............ (383,591) (295,321) (1,069,056) (388,904) (3,066,029)
----------- ---------- ----------- ----------- -----------
Net income.......... $ 547,625 $ 407,825 $ 1,504,319 $ 537,059 $ 4,234,041
=========== ========== =========== =========== ===========

See accompanying notes to financial statements.

F-28

ICI FUNDING CORPORATION

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

RETAINED
EARNINGS TOTAL
NUMBER OF PREFERRED NUMBER OF COMMON CONTRIBUTED (ACCUMULATED SHAREHOLDERS'
SHARES STOCK SHARES STOCK CAPITAL DEFICIT) EQUITY
--------- ---------- --------- ------- ----------- ------------ -------------

Balance, December 31,
1992................... -- $ -- -- $ -- $ -- $ 1,266,779 $ 1,266,779
Net income, 1993........ -- -- -- -- -- 4,234,041 4,234,041
------ ---------- ------ ------- --------- ----------- -----------
Balance, December 31,
1993................... -- -- -- -- -- 5,500,820 5,500,820
Capital contributions,
1994................... -- -- -- -- 361,170 -- 361,170
Net income, 1994........ -- -- -- -- -- 537,059 537,059
------ ---------- ------ ------- --------- ----------- -----------
Balance, December 31,
1994................... 361,170 6,037,879 6,399,049
Contribution
Transaction............ 10,000 519,750 10,000 5,250 (361,170) (7,692,613) (7,528,783)
Capital contribution,
December 28, 1995...... -- 495,000 -- 5,000 -- -- 500,000
Net income, 1995........ -- -- -- -- -- 1,504,319 1,504,319
------ ---------- ------ ------- --------- ----------- -----------
Balance, December 31,
1995................... 10,000 1,014,750 10,000 10,250 -- (150,415) 874,585
Capital Contributions,
1996 (unaudited)....... -- 8,127,900 -- 82,100 -- -- 8,210,000
Net income, three months
ended March 31, 1996
(unaudited)............ -- -- -- -- -- 547,625 547,625
------ ---------- ------ ------- --------- ----------- -----------
Balance, March 31, 1996
(unaudited)............ 10,000 $9,142,650 10,000 $92,350 $ -- $ 397,210 $ 9,632,210
====== ========== ====== ======= ========= =========== ===========

See accompanying notes to financial statements.

F-29

ICI FUNDING CORPORATION

STATEMENTS OF CASH FLOWS

Cash flows from
operating activities:
Net income............ $ 547,625 $ 407,825 $ 1,504,319 $ 537,059 $ 4,234,041
Adjustments to
reconcile net income
to net cash provided
by (used in)
operating activities:
Provision for loan
losses.............. 400,000 -- -- 655,294 175,000
Depreciation and
amortization........ 40,569 487,328 2,911,752 2,219,262 518,789
Gain on sale of
servicing rights.... -- (369,703) (369,703) (4,188,282) (5,332,026)
Net change in mortgage
loans held for sale.. 364,244,429 -- (544,274,962) -- --
Net change in accrued
interest
receivable........... 2,221,515 -- (2,984,867) -- --
Net change in other
assets and
liabilities.......... 159,575 -- (2,553,448) -- --
Net change in accrued
interest expense..... 1,546,121 -- 1,348,424 -- --
------------- ----------- ------------- ----------- ------------
Net cash provided by
(used in) operating
activities........... 369,159,834 525,450 (544,418,485) (776,667) (404,196)
------------- ----------- ------------- ----------- ------------
Cash flows from
investing activities:
Proceeds from sale of
servicing rights..... -- 915,106 1,250,092 8,996,662 7,757,268
Purchase of servicing
rights............... (2,670,945) (1,155,334) (3,865,605) (8,781,244) (12,435,238)
Purchases of premises
and equipment........ -- -- -- (433,199) (419,203)
Advances on loans held
for investment....... -- -- -- (408,054) (284,780)
------------- ----------- ------------- ----------- ------------
Net cash used in
investing
activities.......... (2,670,945) (240,228) (2,615,513) (625,835) (5,381,953)
------------- ----------- ------------- ----------- ------------
Cash flows from
financing activities:
Net change in
borrowings from ICII. -- (285,222) (1,572,520) 1,041,332 5,786,149
Net change in
borrowings from IWLG. (376,883,233) -- 550,290,862 -- --
Capital contributions. 8,210,000 -- 500,000 361,170 --
------------- ----------- ------------- ----------- ------------
Net cash (used in)
provided by
financing
activities.......... (368,673,233) (285,222) 549,218,342 1,402,502 5,786,149
------------- ----------- ------------- ----------- ------------
Net change in cash...... (2,184,344) -- 2,184,344 -- --
Cash at beginning of
period................. 2,184,344 -- -- -- --
------------- ----------- ------------- ----------- ------------
Cash at end of period... $ -- $ -- $ 2,184,344 $ -- $ --
============= =========== ============= =========== ============
Supplementary
information:
Interest paid......... $ 9,672,927 $ 149,259 $ 1,785,092 $ 538,100 $ 126,814
Taxes paid............ 383,591 295,321 1,069,056 388,904 3,066,029
============= =========== ============= =========== ============
Non-cash transactions:
Contribution
Transaction on
November 20, 1995 net
assets reverted to
ICII:
Premises and
equipment........... $ -- $ -- $ 498,486 $ -- $ --
Mortgage servicing
rights.............. -- -- 11,680,939 -- --
Borrowings from ICII. -- -- 4,125,642 -- --
Contributed capital.. -- -- 361,170 -- --
Retained earnings.... -- -- 7,692,613 -- --

See accompanying notes to financial statements.

F-30

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND THE THREE-
YEAR PERIOD ENDED DECEMBER 31, 1995

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

ICI Funding Corporation (ICIFC or the Company) is a wholly-owned subsidiary
of Imperial Credit Industries, Inc. (ICII). Historically, ICIFC was a division
or subsidiary of ICII that began operations in 1990. ICIFC is a mortgage loan
conduit organization which purchases mortgage loans from a network of third
party correspondent loan originators and subsequently securitizes or sells
such loans to permanent investors.

The mortgage banking business is highly competitive. The Company competes
with a number of national, local and regional mortgage banking companies with
operations similar to those of the Company. In addition, competitors or
potential competitors include other types of financial services companies,
such as commercial banks, savings and loan associations and finance companies
who possess substantially greater financial, marketing, technical, personnel
and other resources than the Company.

The financial statements have been prepared in conformity with generally
accepted accounting principles and prevailing practices within the mortgage
banking industry. In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly from those
estimates.

CONTRIBUTION TRANSACTION

On November 20, 1995, the effective date of Imperial Credit Mortgage
Holdings' (IMH) initial public offering (Offering), ICII contributed to ICI
Funding Corporation (ICIFC) certain operating assets and certain customer
lists of ICII's mortgage conduit operations, including all of ICII's mortgage
conduit operations' commitments to purchase mortgage loans subject to rate
locks from correspondents, in exchange for shares representing 100% of the
common stock and 100% of the non-voting preferred stock of ICIFC.
Simultaneously, on the effective date of the Offering, in exchange for 500,000
shares of IMH Common Stock, ICII (1) contributed to IMH all of the outstanding
non-voting preferred stock of ICIFC, which represents 99% of the economic
interest in ICIFC, (2) caused Southern Pacific Thrift and Loan Association
(SPTL), a wholly owned subsidiary of ICII, to contribute to IMH certain
operating assets and certain customer lists of SPTL's warehouse lending
division, and (3) executed an agreement not to compete and a right of first
refusal agreement, each having a term of two years from the effective date of
the Offering. This contribution is known as the Contribution Transaction. All
of the outstanding shares of common stock of ICIFC were retained by ICII.
Lastly, IMH contributed all of the aforementioned operating assets of SPTL's
warehouse lending operations contributed to it by SPTL to Imperial Warehouse
Lending Group (IWLG) in exchange for shares representing 100% of the common
stock of IWLG. On the effective date of the Offering, the net tangible book
value of the assets contributed pursuant to the Contribution Transaction was
$525,000. The assets contributed were recorded by IMH at the net book value of
SPTL and ICII which were also estimated to be their fair value. ICII and SPTL
retained all other assets and liabilities related to the contributed
operations which consist of $11.7 million mortgage servicing rights (MSRs),
$22.4 million finance receivables and $26.6 million in advances made by ICII
and SPTL to fund mortgage conduit loan acquisitions and to fund finance
receivables, respectively.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The operations of ICIFC as a division or subsidiary of ICII prior to the
Contribution Transaction are presented in the financial statements as a stand-
alone company. Certain adjustments, as described below, were made to
historical operations in order to provide fair presentation of the financial
operations of ICIFC.

F-31

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

GAIN (LOSS) ON SALE OF LOANS

ICII entered into an agreement with SPTL, its wholly owned subsidiary, under
which ICII provides loan solicitation and origination services, including
credit review, asset appraisal and documentation, pursuant to specific
underwriting criteria established by SPTL and consistent with the Federal
National Mortgage Association, Federal Home Loan Mortgage Company or other
investor guidelines. Final loan approval is given by SPTL prior to issuance of
any commitments. ICII also, under the agreement, may purchase mortgage loans
at book value from SPTL and sell them to ICII investors.

Prior to the Contribution Transaction, as a division of ICII, ICIFC
historically, under this agreement, provided these solicitation and
origination services relating to its correspondent customers, and purchased
mortgage loans at book value from SPTL concurrent with sales to investors by
ICIFC. ICIFC received as compensation all origination fees and points
received, and recognized all gains or losses in connection with the sale of
loans.

Prior to the Contribution Transaction, gain (loss) on sale of loans included
amounts allocated to ICIFC from ICII's forward contracts and other loan
hedging activities. Gains and losses from these activities were allocated to
ICIFC based on the ratio of ICIFC's principal amount of loan sales to ICII's
total principal amount of loans sold. For the period January 1, 1995 through
November 19, 1995 and for the years ended December 31, 1994, 1993, the total
gains or (losses) allocated were $2.6 million, $3.8 million and ($1.4)
million, respectively. ICII did not allocate outstanding commitments to ICIFC
at the end of any reporting period. After the date of the Contribution
Transaction, ICII discontinued these allocations for ICIFC, and ICIFC hedges
its own loans.

ICIFC recognizes gain or loss on the sale of loans when the sales
transaction settles and the risks and rewards of ownership are determined to
have passed to the purchasing party.

BORROWINGS FROM ICII

Historical operations of ICIFC, prior to the Contribution Transaction, have
been adjusted to reflect the funding of net assets by ICII. These adjustments
are disclosed in the accompanying financial statements as "Borrowings from
ICII." Because these borrowings would have been secured primarily by ICIFC's
mortgage servicing rights, its most significant assets, no more than 50% of
the mortgage servicing rights was reflected in the borrowings from ICII (based
on management's assumption that a lender would not lend more than 50% of an
asset of this type). Additionally, the historical operations of ICIFC have
been adjusted to reflect the estimated interest charges on these borrowings,
in the accompanying statements of operations.

The interest charges allocated are based upon estimated average borrowing
balances and ICII's estimated cost of funds, computed based on a weighted
average of borrowings. Borrowing rates used were ICII's actual average cost of
funds. The average borrowings and interest rates used to determine the
interest on borrowings are as follows:

JANUARY 1, FOR THE YEAR ENDED
1995 THROUGH DECEMBER 31,
NOVEMBER 20, THREE MONTHS ENDED ----------------------
1995 MARCH 31, 1995 1994 1993
------------ ------------------ ---------- ----------
(UNAUDITED)

Estimated average
borrowings............. $4,785,268 $5,807,761 $5,234,439 $1,806,470
Interest rate........... 10.28% 10.28% 10.28% 7.02%
Interest allocation..... $ 436,668 $ 149,259 $ 538,100 $ 126,814

F-32

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

EQUITY

Prior to the effective date of the Offering, ICIFC had no contributed
capital or retained earnings recorded in its accounts. To properly reflect the
historical financial operations of ICIFC, retained earnings were recorded as a
result of net income or loss from operations on an adjusted historical basis,
and contributed capital was recorded to fund ICIFC's assets in the amount of
the shortfall of borrowings plus retained earnings. Under this criteria,
allocated capital contributions were reflected in 1994 in the amount of
$361,170.

INCOME TAXES

ICIFC did not record income taxes in its historical operations. The
accompanying financial statements have been adjusted to reflect income taxes
for ICIFC as if it had been a separate company. As a subsidiary of ICII, ICIFC
would file a consolidated Federal income tax return and a combined California
franchise tax return with ICII. ICII's tax allocation policy for financial
statement purposes is to allocate income tax provision or benefit based on
income (loss) before income taxes (benefit) of each entity within its
consolidated group, adjusted for nontaxable or nondeductible items of income
and expense.

Effective January 1, 1993, ICIFC adopted SFAS 109, resulting in no material
adjustment to income. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax base. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

MORTGAGE LOANS HELD FOR SALE

Mortgage loans held for sale are stated at the lower of cost or market in
the aggregate as determined by outstanding commitments from investors or
current investor yield requirements.

Interest is recognized as revenue when earned according to the terms of the
mortgage loans and when, in the opinion of management, it is collectible.
Nonrefundable fees and direct costs associated with the origination or
purchase of loans are deferred and recognized when the loans are sold as gain
or loss on sale of mortgage loans.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation or
amortization. Depreciation on premises and equipment is recorded using the
straight-line method over the estimated useful lives of individual assets
(three to seven years).

FORWARD CONTRACTS AND COMMITMENTS

In order for ICII to maintain an orderly market for the loans it acquires,
ICIFC sells mortgage-backed securities through forward delivery contracts.
Income or loss on these contracts is recorded at the time of sale of the
related contracts or loans as a component of the gain or loss on sale of the
loan.

If any party to the contracts noted above failed completely to perform,
ICIFC would be exposed to additional interest rate risk. The Company's
principal hedging activity consists of optional and mandatory commitments to
deliver closed mortgage loans to institutional investors, which do not require
any collateral deposits.

F-33

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SERVICING INCOME

Servicing income is reported as earned, principally on a cash basis when the
majority of the service process is completed.

MORTGAGE SERVICING RIGHTS

Mortgage servicing rights (MSRs) represent the cost of acquiring the rights
to service mortgage loans. ICIFC amortizes MSRs in proportion to, and over the
period of, expected future net servicing income.

SFAS No. 122 requires that a portion of the mortgage loan's cost be
allocated to the mortgage loan servicing right based on its fair value
relative to the loan as a whole. To determine the fair value of the servicing
rights created, ICIFC uses a valuation model that calculates the present value
of future net servicing revenues to determine the fair value of the servicing
rights. In using this valuation method, ICIFC incorporates assumptions that
market participants would use in estimating future net servicing income which
includes estimates of the cost of servicing, a discount rate, an inflation
rate, ancillary income per loan, a prepayment rate, and a default rate.

ICIFC determines servicing value impairment by disaggregating ICIFC's
servicing portfolio into its predominant risk characteristics. ICIFC
determines those risk characteristics to be loan program type and interest
rate. Interest rates are stratified using 100 basis point increments. These
segments of the portfolio are then evaluated, using market prices under
comparable servicing sale contracts, when available, or alternatively using a
valuation model that calculates the present value of future net servicing
revenues using current market assumptions at the end of the quarter. The
calculated value is then compared to the capitalized recorded value of each
loan type and interest rate segment to determine if a valuation allowance is
required.

ICIFC continuously evaluates its MSRs to determine if fair value is below
the carrying values of its MSRs. If the undiscounted projected net future
servicing income is less than the carrying amount of any individual mortgage
servicing portfolio, the portfolio may have to be reduced through a provision
recorded to increase the MSR valuation allowance in the period the fair value
declined below the MSR's carrying value. In preparing its evaluation, ICIFC
uses constant prepayment rates (CPR's) relating to interest rates on each
portfolio, loan types, and maturity dates to determine the appropriate amount
of amortization of the MSRs.

SALES OF SERVICING RIGHTS

ICIFC recognizes gain or loss on the sale of servicing rights when the sales
contract has been executed and the risks and rewards of ownership are
determined to have passed to the purchasing party. Gains and losses are
computed by deducting the basis in the servicing rights and any other costs
associated with the sale from the purchase price.

ADVERTISING

The Company accounts for its advertising costs as non-direct response
advertising. Accordingly, advertising costs are expensed as incurred.

F-34

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

RECLASSIFICATIONS

Certain items in prior periods have been reclassified to conform to the
current presentation.

2. LOANS HELD FOR INVESTMENT

Activity in the allowance for loan losses for loans held for investment was
as follows:

FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1994 1993
--------- ---------

Balance, beginning of year............................. $ 36,823 $ 249,075
Provision for losses charged to expense................ 655,294 175,000
Loans charged off...................................... (692,117) (387,252)
--------- ---------
Balance, end of year................................... $ -- $ 36,823
========= =========

There were no loans held for investment at March 31, 1996 (unaudited),
December 31, 1995, March 31, 1995 (unaudited) or December 31, 1994.

3. MORTGAGE LOANS HELD FOR SALE

Mortgage loans held for sale consisted of the following:

MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)

Mortgage loans held for sale...................... $176,524,309 $536,356,411
Premium on loans.................................. 3,106,224 7,918,551
------------ ------------
$179,630,533 $544,274,962
============ ============

There were no mortgage loans held for sale as of December 31, 1994.

Substantially all of the mortgage loans purchased by ICIFC are fixed-rate or
adjustable-rate conforming mortgage loans secured by first liens on single-
family residential properties. Because of the concentration of the Company's
mortgage loans located in California, which was 60% at December 31, 1995, a
significant decline in regional economic conditions, or some other regional
catastrophe, could result in fewer mortgage loans available for lending by the
Company and ultimately a decline in interest income and fee income. Moreover,
such an event or events could affect the ability of borrowers to payoff their
loan with the Company.

4. PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

DECEMBER 31,
MARCH 31, -----------------
1996 1995 1994
----------- -------- --------
(UNAUDITED)

Premises and equipment........................ $525,000 $733,431 $852,402
Less accumulated depreciation................. 35,000 217,181 208,431
-------- -------- --------
$490,000 $516,250 $643,971
======== ======== ========

F-35

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. MORTGAGE SERVICING RIGHTS

Changes in mortgage servicing rights were as follows:

MARCH 31, DECEMBER 31,
----------------------- --------------------------------------
1996 1995 1995 1994 1993
---------- ----------- ------------ ----------- -----------
(UNAUDITED)

Beginning Balance....... $ -- $11,453,240 $ 11,453,240 $ 9,550,763 $ --
Additions............... 2,670,945 1,155,334 4,000,429 8,781,244 12,435,238
Sales of servicing
rights................. -- (545,403) (880,389) (4,808,380) (2,425,242)
Amortization............ (14,319) (447,650) (2,892,341) (2,070,387) (459,233)
Transfer to ICII........ -- -- (11,680,939) -- --
---------- ----------- ------------ ----------- -----------
Ending balance.......... $2,656,626 $11,615,521 $ -- $11,453,240 $ 9,550,763
========== =========== ============ =========== ===========

6. RELATED PARTY TRANSACTIONS

RELATED PARTY COST ALLOCATIONS

ICIFC was allocated various costs from ICII. The costs of these services
were not directly attributable to ICIFC and primarily include general
corporate overhead such as human resources, data processing, telephone and
other communications and general and administrative expense (including loan
administration costs, accounting, legal and insurance). These expenses were
allocated by ICII to all divisions based typically either on a per employee
basis, based on origination volume or an even allocation of total expense.
Management believes these methods of allocation are reasonable. Total
allocations of expense for the period January 1, 1995 through November 19,
1995, for the three months ended March 31, 1995 (unaudited) and for the years
endedDecember 31, 1994 and 1993 were $222,361, $65,237, $460,638 and $406,421,
respectively.

On the effective date of the Initial Public Offering, ICIFC entered into a
services agreement with ICII under which ICII provides various services to
ICIFC, including data processing, human resource administration, general
ledger accounts, check processing, remittance processing and payment of
accounts payable. ICII charges fees for each of the services based upon usage.
As part of the services, ICII provides ICIFC with insurance coverage and self
insurance programs, including health insurance. The charge to ICIFC for
coverage is based upon a pro rata portion of the costs to ICII for its various
policies which amounted to $96,692 and $24,669 for the three months ended
March 31, 1996 (unaudited) and the period November 20, 1995 through December
31, 1995.

SUB-SERVICING

For all periods presented in ICIFC's financial statements, ICII provided
sub-servicing to ICIFC for a sub-servicing fee of approximately $7.50 per loan
per month, which management believes to be a market rate. The sub-servicing
fee offsets "Loan Servicing Income" in the accompanying statements of
operations of ICIFC and amounted to $96,415, $292,696, $1,100,259, $1,054,940
and $442,039 for the three months ended March 31, 1996 and 1995 (unaudited)
and for the years ended December 31, 1995, 1994 and 1993, respectively.

CASH

Prior to the Contribution Transaction ICIFC had no cash accounts. All
operations were funded directly by ICII. Adjustments were made to ICIFC's
financial statements to reflect these fundings as Borrowings from ICII. ICIFC
did not reflect any accounts receivable or payable on its balance sheets prior
to the Contribution Transaction because all transactions of ICIFC either
increased or decreased its borrowings from ICII.

F-36

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

At March 31, 1996 (unaudited), $1,468,178 of the mortgage servicing rights
relates to $310 million of mortgage loans sold, servicing retained by ICIFC,
to IMH in March 1996.

BORROWINGS

The Company has a $600 million warehouse borrowing agreement with IWLG of
which $173 million and $550 million was outstanding at March 31, 1996
(unaudited) and December 31, 1995, respectively. Interest expense recorded
related to this borrowing was $11,219,048 and $1,348,424 for the three months
endedMarch 31, 1996 (unaudited) and for the year ended December 31, 1995,
respectively.

BULK MORTGAGE LOAN PURCHASES

During the first quarter of 1996 (unaudited), ICIFC purchased from ICII bulk
mortgage loans packages of 30-year fully amortizing six-month adjustable LIBOR
and 30 and 15-year fixed rate first and second trust deed mortgages having a
principal balance of $164,295,525 with net premiums paid of $1,917,427.
Servicing rights on all mortgage loans were released to ICIFC.

On December 5, 1995 and December 13, 1995, ICIFC purchased from ICII bulk
mortgage loan packages of 30-year fully amortizing six-month adjustable LIBOR
and one-year adjustable Treasury Bill rate loans and 30 and 15-year fixed rate
second trust deed mortgages with servicing rights on all mortgage loans
released to ICIFC. The principal balances of the mortgages at the time of
purchase was $172,960,030, with net premiums paid of $3,664,157.

On December 29, 1995, ICIFC purchased from SPTL two bulk mortgage loan
packages of 30-year fully amortizing six-month adjustable LIBOR, one-year
adjustable Treasury Bill rate loans and 30- and 15-year fixed rate fully
amortizing loans. The principal balances of the loans in the servicing
released and servicing retained bulk package at the time of purchase was
$328,450,611 with net premiums paid of $3,517,076.

BULK MORTGAGE LOAN SALES (UNAUDITED)

On March 29, 1996, ICIFC sold to IMH bulk mortgage loans packages of 30-year
fully amortized six-month adjustable LIBOR and 15-year fixed rate second trust
deed mortgages having a principal balance of $310,998,377 (unaudited) with net
premiums paid of $3,934,710 (unaudited). In conjunction with this sale, ICIFC
recorded originated mortgage servicing rights of $1,468,178 and a deferred
gain of $571,615, which will be amortized over the life of the loans.

OCCUPANCY

Subsequent to the Contribution Transaction, the Company is allocated rent
expense from IMH based on number of employees. Such allocation was $12,210 for
the period November 21, 1995 through December 31, 1995.

NON-COMPETE AGREEMENT AND RIGHT OF FIRST REFUSAL AGREEMENT

Pursuant to the Non-Compete Agreement, ICII and any entity of which ICII
owns more than 25% of the voting securities (a 25% entity) may not compete
with IWLG's Warehouse Lending Operations and may not establish a network of
third party correspondent loan originators or another end-investor in non-
conforming mortgage loans. The agreement expires two years from the effective
date of the Offering.

F-37

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Pursuant to the Right of First Refusal Agreement, ICII granted ICIFC a right
of first refusal to purchase all non-conforming mortgage loans that ICII or
any 25% entity originates or acquires and subsequently offers for sale and
ICIFC granted ICII, or any 25% entity designated by ICII, a right of first
refusal to purchase all non-conforming mortgage loans that ICIFC acquires and
subsequently offers for sale. In addition, for a period of the earlier of nine
months from the effective date of the Offering and that date upon which IMH
accumulates $300 million of mortgage loans and/or mortgage-backed securities,
neither ICII nor any 25% entity will be permitted to purchase any non-
conforming bulk loan package having a principal balance of $50 million or more
without first allowing ICIFC the opportunity to bid to purchase said package.

Additional related party transactions are described elsewhere in the
financial statement footnotes.

7. INCOME TAXES

The Financial Accounting Standards Board issued Statement No. 109,
"Accounting For Income Taxes" (SFAS 109) which was effective for fiscal years
beginning after December 15, 1992. ICIFC adopted SFAS 109 on January 1, 1993
on a prospective basis. Implementation of SFAS 109 had no material impact on
ICIFC's financial position or results of operations for the year ended
December 31, 1993.

ICIFC's income taxes were as follows:

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
---------- --------- ----------

Current:
Federal.................................. $ 862,926 $(316,465) $ (769,178)
State.................................... 169,241 (109,137) (265,259)
---------- --------- ----------
Total current.............................. 1,032,167 (425,602) (1,034,437)
---------- --------- ----------
Deferred:
Federal.................................. 11,614 605,643 3,048,990
State.................................... 25,275 208,863 1,051,476
---------- --------- ----------
Total deferred............................. 36,889 814,506 4,100,466
---------- --------- ----------
Total income taxes......................... $1,069,056 $ 388,904 $3,066,029
========== ========= ==========

The income tax provision differs from statutory Federal corporate income tax
rate primarily due to state income taxes.

Deferred income taxes arise from differences in the bases of assets and
liabilities for tax and financial reporting purposes. The following table
shows the primary components of ICIFC's net deferred tax liability at December
31, 1995 and 1994.

1995 1994
------- ----------

Deferred tax liabilities:
Mortgage servicing rights.............................. $ -- $4,810,361
State tax benefit...................................... 10,967 --
------- ----------
Total................................................ $10,967 $4,810,361
======= ==========

ICIFC's net deferred tax liabilities are included on the balance sheets in
other assets and borrowings from ICII at December 31, 1995 and 1994,
respectively.

There were no deferred tax assets at December 31, 1995 and 1994.

F-38

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

8. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value
of Financial Instruments," and SFAS No. 119, "Disclosures About Derivative
Financial Instruments and Fair Value of Financial Instruments." The estimated
fair value amounts have been determined by ICIFC using available market
information and appropriate valuation methodologies, however, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts ICIFC could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

DECEMBER 31, 1995
-------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
(DOLLARS IN
THOUSANDS)

Assets:
Cash.................................................. $ 2,184 $ 2,184
Mortgage loans held for sale.......................... 544,273 544,273
Liabilities:
Borrowings from IWLG.................................. 550,291 550,291
Off balance-sheet commitments, unrealized gains
(losses)............................................. -- (38,021)

The following describes the methods and assumptions used by ICIFC in
estimating fair values.

CASH

The carrying amount for cash approximates fair value because these
instruments are demand deposits and do not present unanticipated interest rate
or credit concerns.

MORTGAGE LOANS HELD FOR SALE

The fair value of mortgage loans held for sale is estimated based on quoted
market prices from dealers and brokers for similar types of mortgage loans.

BORROWINGS FROM IWLG

Fair values approximate the carrying amounts because of the short-term
maturity of the liabilities.

OFF BALANCE SHEET COMMITMENTS

The fair value of commitments to purchase mortgage loans is equal to the
unamortized commitment fee received by the Company from sellers to purchase
such mortgage loans.

F-39

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

9. EMPLOYEE BENEFIT PLANS

PROFIT SHARING AND 401(K) PLAN

Prior to July 1, 1993, Imperial Bancorp (the majority shareholder of ICII)
had a noncontributory profit sharing plan in which employees the Company were
eligible to participate at year end if they had been employed for at least
1,000 hours during the year. For 1993, there was no contribution charged to
operations.

Imperial Bancorp also had a 401(k) plan in which all employees of ICIFC had
been eligible to participate. On July 1, 1993, ICII terminated its
participation in Imperial Bancorp's 401(k) and profit sharing plans,
establishing its own 401(k) plan (the Plan) in which employees of ICIFC were
eligible to participate. On September 30, 1993, Imperial Bancorp transferred
all plan assets to ICII.

Under the ICII's 401(k) plan, employees of the Company may contribute up to
14% of their salaries. The Company will match 50% of the first 4% of employee
contributions. An additional Company contribution may be made at the
discretion of ICIFC.

ICIFC does not have its own 401(k) or profit sharing plan. As such,
employees of ICIFC participate in ICII's 401(k) plan. The Company's matching
and discretionary contributions were not significant for any period presented.

10. COMMITMENTS AND CONTINGENCIES

LOAN SERVICING

As of December 31, 1994, ICIFC was servicing loans for others totaling
approximately $1.9 billion. Properties securing the mortgage loans in ICIFC's
servicing portfolio are primarily located in California. No loans were
serviced for others at December 31, 1995.

Related fiduciary funds are held in trust for investors in non-interest
bearing accounts. These funds are segregated in special bank accounts and are
held as deposits at SPTL.

SALES OF LOANS AND SERVICING RIGHTS

In the ordinary course of business, ICIFC is exposed to liability under
representations and warranties made to purchasers and insurers of mortgage
loans and the purchasers of servicing rights. Under certain circumstances,
ICIFC is required to repurchase mortgage loans if there has been a breach of
representations or warranties. In the opinion of management, the potential
exposure related to these representations and warranties will not have a
material adverse effect on the financial position and operating results of
ICIFC.

During the year ended December 31, 1994, ICIFC retained servicing rights on
$1.6 billion of mortgage loans sold and released servicing rights to the
purchasers on $199 million of mortgage loans sold. During the year ended
December 31, 1993, ICIFC retained servicing rights on $1.2 billion of mortgage
loans sold and released servicing rights to the purchasers on $552 million of
mortgage loans sold.

COMMITMENTS

ICIFC establishes mortgage loan purchase commitments (master commitments)
with sellers that, subject to certain conditions, entitle the seller to sell
and obligate ICIFC to purchase a specified dollar amount of non-conforming
mortgage loans over a period generally ranging from six months to one year.
The terms of each master commitment specify whether a seller may sell loans to
ICIFC on a mandatory, best efforts or optional

F-40

ICI FUNDING CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

basis, or a combination thereof. Master commitments generally do not obligate
ICIFC to purchase loans at a specific price, but rather provide the seller
with a future outlet for the sale of its originated loans based on ICIFC's
quoted prices at the time of purchase.

ICIFC may from time to time provide provisions for loan losses related to
estimating losses from the breach of a standard representation and warranty on
mortgage loans previously sold. ICIFC recorded such provision for the three
months ended March 31, 1996 (unaudited) of $400,000.

As of March 31, 1996 (unaudited) and December 31, 1995, ICIFC had
outstanding short term master commitments with 28 and 18 sellers to purchase
mortgage loans in the aggregate principal amount of approximately $595.0
million and $241.0 million over periods ranging from six months to one year,
of which $93.1 million and $35.7 million, respectively, had been purchased or
committed to be purchased pursuant to rate locks. These rate-locks were made
pursuant to master commitments, bulk rate-locks and other negotiated rate-
locks. There is no exposure to credit loss in this type of commitment until
the loans are funded, and interest rate risk associated with the short-term
commitments is mitigated by the use of forward contracts to sell loans to
investors.

FORWARD CONTRACTS

The Company sells mortgage-backed securities through forward delivery
contracts with major dealers in such securities. At March 31, 1996 (unaudited)
and December 31, 1995, the Company had $125,000,000 and $86,700,000,
respectively, in outstanding commitments to sell mortgage loans through
mortgage-backed securities. These commitments allow the Company to enter into
mandatory commitments when the Company notifies the investor of its intent to
exercise a portion of the forward delivery contracts. The Company was not
obligated under mandatory commitments to deliver loans to such investors at
March 31, 1996 (unaudited) and December 31, 1995.

The credit risk of forward contracts relates to the counterparties' ability
to perform under the contract. The Company evaluates counterparties based on
their ability to perform prior to entering into any agreements.

OPTIONS

In order to protect against changes in the value of mortgage loans held for
sale, the Company may sell call or buy put options on U.S. Treasury bonds and
mortgage-backed securities. The Company generally sells call or buys put
options to hedge against adverse movements of interest rates affecting the
value of its mortgage loans held for sale.

The risk in writing a call option is that the Company gives up the
opportunity for profit if the market price of the mortgage loans increases and
the option is exercised. The Company also has the additional risk of not being
able to enter into a closing transaction if a liquid secondary market does not
exist. The risk of buying a put option is limited to the premium the Company
paid for the put option.

The Company had written option contracts with an outstanding principal
balance of $16 million at December 31, 1995. The Company received
approximately $100,000 in premiums on these options.

F-41

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION OF
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OF SOLICITATION IS UNLAWFUL.

---------------

TABLE OF CONTENTS

PAGE
----

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
The Company............................................................... 20
Use of Proceeds........................................................... 20
Price Range of Common Stock............................................... 20
Dividend Policy and Distributions......................................... 21
Dividend Reinvestment Plan................................................ 21
Capitalization............................................................ 23
Selected Financial Data................................................... 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 36
Imperial Credit Mortgage Holdings, Inc. .................................. 59
Imperial Credit Advisors, Inc. ........................................... 65
Relationships with Affiliates............................................. 69
Certain Transactions...................................................... 69
Shares Eligible for Future Sale........................................... 74
Principal Stockholders.................................................... 75
Description of Capital Stock.............................................. 76
Certain Provisions of Maryland Law and of the Company's Charter and
Bylaws................................................................... 78
Federal Income Tax Considerations......................................... 80
ERISA Investors........................................................... 89
Underwriting.............................................................. 90
Legal Matters............................................................. 91
Experts................................................................... 91
Additional Information.................................................... 91
Glossary.................................................................. 92
Index to Financial Statements............................................. F-1

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
------------------------------------------------------------------------------
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2,500,000 SHARES

[LOGO of ICMH]

COMMON STOCK

---------------

PROSPECTUS

---------------

PAINEWEBBER INCORPORATED

OPPENHEIMER & CO., INC.

STIFEL, NICOLAUS & COMPANY
INCORPORATED

EVEREN SECURITIES, INC.

---------------

, 1996

------------------------------------------------------------------------------
------------------------------------------------------------------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of Common Stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee.

AMOUNT
TO BE
PAID
--------

SEC registration fee.................................................. $ 15,366
NASD filing fee....................................................... 4,956
American Stock Exchange listing fee................................... 17,500
New York real estate fee.............................................. 50,000
Printing and engraving expenses....................................... 200,000
Legal fees and expenses............................................... 200,000
Accounting fees and expenses.......................................... 150,000
Blue Sky fees and expenses............................................ 50,000
Transfer agent and custodian fees..................................... 20,000
Miscellaneous......................................................... 92,178
--------
Total............................................................... $750,000
========

ITEM 31. SALES TO RELATED PARTIES

On November 20, 1995, the effective date of the Registrant's initial public
offering, ICII contributed to ICIFC certain of the operating assets and
certain customer lists of ICII's mortgage conduit operations including all of
ICII's mortgage conduit operations' commitments to purchase mortgage loans
subject to rate locks from correspondents (having a principal balance of $43.3
million at September 30, 1995), in exchange for shares representing 100% of
the common stock and 100% of the non-voting preferred stock of ICIFC.
Simultaneously, on such date, in exchange for 500,000 shares of Common Stock,
ICII (1) contributed to the Registrant all of the outstanding non-voting
preferred stock of ICIFC, which represents 99% of the economic interest in
ICIFC,(2) caused SPTL to contribute to the Registrant certain of the operating
assets and certain customer lists of SPTL's warehouse lending division, and
(3) executed an agreement not to compete and a right of first refusal
agreement each having a term of two years from the effective date of the
Registrants' initial public offering. This contribution is known as the
"Contribution Transaction." Of the 500,000 shares of Common Stock issued
pursuant to the Contribution Transaction, 450,000 shares were issued to ICII
and 50,000 shares were issued to SPTL. The shares issued to ICII and SPTL were
issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (1) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.

II-1

employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. The Bylaws of the Company obligate it, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (1) any present or former Director or officer who is made a party to the
proceeding by reason of his service in that capacity or (2) any individual
who, while a Director of the Company and at the request of the Company, serves
or has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise and who is made a party to the proceeding by
reason of his service in that capacity. The Charter and Bylaws also permit the
Company to indemnify and advance expenses to any person who served a
predecessor of the Company in any of the capacities described above and to any
employee or agent of the Company or a predecessor of the Company.

The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (1) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (2) the director or officer actually
received an improper personal benefit in money, property or services or (3) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as a
condition to advancing expenses, to obtain (1) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the
Bylaws and (2) a written statement by or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that
the standard of conduct was not met.

In addition, the Registrant has entered into an Indemnity Agreement (Exhibit
10.4 hereto) with its officers and Directors. The Underwriting Agreement
(Exhibit 1.1) also provides for indemnification by the Underwriters of the
Company, its Directors and officers and persons who control the Company within
the meaning of Section 15 of the Securities Act with respect to certain
liabilities, including liabilities arising under the Securities Act.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements included in the Prospectus are:

IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.

Consolidated Balance Sheet at March 31, 1996 (unaudited) and
Consolidated Balance Sheets at December 31, 1995 and 1994 (audited);
Consolidated Statements of Operations for the three months ended March
31, 1996 and 1995 (unaudited) and Consolidated Statements of
Operations for the years ended December 31, 1995, 1994 and 1993
(audited);
Consolidated Statement of Changes in Stockholders' Equity for the
three months ended March 31, 1996 (unaudited) and Consolidated
Statements of Changes in Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993 (audited);
Consolidated Statements of Cash Flows for the three months ended March
31, 1996 and 1995 (unaudited) and Consolidated Statements of Cash
Flows for the years ended December 31, 1995, 1994 and 1993 (audited);
Notes to Consolidated Financial Statements

II-2

ICI FUNDING CORPORATION

Balance Sheet at March 31, 1996 (unaudited) and Balance Sheets at
December 31, 1995 and 1994 (audited);
Statements of Operations for the three months ended March 31, 1996 and
1995 (unaudited) and Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 (audited);
Statement of Changes in Shareholders' Equity for the three months ended
March 31, 1996 (unaudited) and Statements of Changes in Shareholders'
Equity for the years ended December 31, 1995, 1994 and 1993 (audited);
Statements of Cash Flows for the three months ended March 31, 1996 and
1995 (unaudited) and Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 (audited)
Notes to Financial Statements

All schedules have been omitted because they are either not applicable, not
required or the information required has been disclosed in the financial
statements and related notes or otherwise in the Prospectus.

(b) Exhibits

EXHIBIT
NO.
-------

1.1 -- Form of Underwriting Agreement.
3.1+ -- Charter of the Registrant.
3.2+ -- Bylaws of the Registrant.
4.1+ -- Form of Stock Certificate of the Company.
5.1 -- Opinion of Freshman, Marantz, Orlanski, Cooper & Klein.
5.2 -- Opinion of Ballard Spahr Andrews & Ingersoll.
8.1 -- Opinion of Latham & Watkins.
10.1+ -- Form of Management Agreement between the Registrant and Imperial
Credit Advisors, Inc.
10.2+ -- Form of Submanagement Agreement between Imperial Credit Advisors,
Inc. and Imperial Credit Industries, Inc.
10.3+ -- Stock Option Plan.
10.4+ -- Form of Indemnity Agreement between the Registrant and its
Directors and officers.
10.5+ -- Form of Tax Agreement between the Registrant and Imperial Credit
Industries, Inc.
10.6+ -- Form of Services Agreement between the Registrant and Imperial
Credit Industries, Inc.
10.7+ -- Form of Sublease between the Registrant and Imperial Credit
Industries, Inc. regarding Santa Ana Heights facility.
10.8+ -- Form of Employment Agreement.
10.9+ -- Form of Loan Purchase and Administrative Services Agreement between
the Registrant and ICI Funding Corporation.
10.10+ -- Form of Contribution Agreement between the Registrant, Imperial
Credit Industries, Inc., Southern Pacific Thrift & Loan
Association, ICI Funding Corporation and Imperial Warehouse Lending
Group, Inc.
10.11+ -- Form of Non-Competition Agreement between the Registrant and
Imperial Credit Industries, Inc.
10.12+ -- Form of Right of First Refusal Agreement between Imperial Credit
Industries, Inc. and ICI Funding Corporation.
10.13+ -- Form of Dividend Reinvestment Plan.
10.14 -- Servicing Agreement between the Registrant and ICI Funding
Corporation.
11 -- Statement regarding computation of per share earnings.
21.1+ -- Subsidiaries of the Registrant.
23.1 -- Consent of Freshman, Marantz, Orlanski, Cooper & Klein (contained
in Exhibit 5.1).
23.2 -- Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit
5.2).
23.3 -- Consent of Latham & Watkins (contained in Exhibit 8.1).
23.4 -- Consent of KPMG Peat Marwick LLP regarding Registrant.
23.5 -- Consent of KPMG Peat Marwick LLP regarding ICI Funding Corporation.
24.1* -- Power of Attorney.

II-3

- --------

* Previously filed.
+ Incorporated by reference to, and all such exhibits have the corresponding
Exhibit Number filed as part of the Registration Statement on Form S-11 (File
No. 33-96670) and Amendments No. 1, 2 and 3 filed with the Securities and
Exchange Commission on September 7, 1995, October 23, 1995, October 30, 1995
and November 8, 1995, respectively.

ITEM 36. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-11 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Santa Ana Heights, State of
California, on the 29th day of May, 1996.

IMPERIAL CREDIT MORTGAGE HOLDINGS,
INC.

/s/ Joseph R. Tomkinson
By:____________________________________
Joseph R. Tomkinson
Vice Chairman of the Board
and Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Joseph R. Tomkinson Vice Chairman of the Board May 29, 1996
____________________________________ and Chief Executive Officer
Joseph R. Tomkinson (Principal Executive Officer)

* Chief Financial Officer May 29, 1996
____________________________________ (Principal Financial and
Richard J. Johnson Accounting Officer)

*
____________________________________ Chairman of the Board May 29, 1996
H. Wayne Snavely

*
____________________________________ Director May 29, 1996
James Walsh

*
____________________________________ Director May 29, 1996
Frank Filipps

*
____________________________________ Director May 29, 1996
Stephen R. Peers

*By: /s/ Joseph R. Tomkinson
____________________________________
Joseph R. Tomkinson
Attorney-in-Fact

II-5

EXHIBIT INDEX

SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------

1.1 -- Form of Underwriting Agreement.
3.1+ -- Charter of the Registrant.
3.2+ -- Bylaws of the Registrant.
4.1+ -- Form of Stock Certificate of the Company.
5.1 -- Opinion of Freshman, Marantz, Orlanski, Cooper &
Klein.
5.2 -- Opinion of Ballard Spahr Andrews & Ingersoll.
8.1 -- Opinion of Latham & Watkins.
10.1+ -- Form of Management Agreement between the Registrant
and Imperial Credit Advisors, Inc.
10.2+ -- Form of Submanagement Agreement between Imperial
Credit Advisors, Inc. and Imperial Credit
Industries, Inc.
10.3+ -- Stock Option Plan.
10.4+ -- Form of Indemnity Agreement between the Registrant
and its Directors and officers.
10.5+ -- Form of Tax Agreement between the Registrant and
Imperial Credit Industries, Inc.
10.6+ -- Form of Services Agreement between the Registrant
and Imperial Credit Industries, Inc.
10.7+ -- Form of Sublease between the Registrant and Imperial
Credit Industries, Inc. regarding Santa Ana Heights
facility.
10.8+ -- Form of Employment Agreement.
10.9+ -- Form of Loan Purchase and Administrative Services
Agreement between the Registrant and ICI Funding
Corporation.
10.10+ -- Form of Contribution Agreement between the
Registrant, Imperial Credit Industries, Inc.,
Southern Pacific Thrift & Loan Association, ICI
Funding Corporation and Imperial Warehouse Lending
Group, Inc.
10.11+ -- Form of Non-Competition Agreement between the
Registrant and Imperial Credit Industries, Inc.
10.12+ -- Form of Right of First Refusal Agreement between
Imperial Credit Industries, Inc. and ICI Funding
Corporation.
10.13+ -- Form of Dividend Reinvestment Plan.
10.14 -- Servicing Agreement between the Registrant and ICI
Funding Corporation.
11 -- Statement regarding computation of per share
earnings.
21.1+ -- Subsidiaries of the Registrant.
23.1 -- Consent of Freshman, Marantz, Orlanski, Cooper &
Klein (contained in Exhibit 5.1).
23.2 -- Consent of Ballard Spahr Andrews & Ingersoll
(contained in Exhibit 5.2).
23.3 -- Consent of Latham & Watkins (contained in Exhibit
8.1).
23.4 -- Consent of KPMG Peat Marwick LLP regarding
Registrant.
23.5 -- Consent of KPMG Peat Marwick LLP regarding ICI
Funding Corporation.
24.1* -- Power of Attorney.

- --------

* Previously filed.
+ Incorporated by reference to, and all such exhibits have the corresponding
Exhibit Number filed as part of the Registration Statement on Form S-11
(File No. 33-96670) and Amendments No. 1, 2 and 3 filed with the Securities
and Exchange Commission on September 7, 1995, October 23, 1995, October 30,
1995 and November 8, 1995, respectively.


 
                                                                     EXHIBIT 1.1


                                2,500,000 Shares

                    IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.

                                  Common Stock

                             UNDERWRITING AGREEMENT
                             ----------------------


                                                                          [DATE]


PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
STIFEL, NICOLAUS & COMPANY INCORPORATED
EVEREN SECURITIES, INC.
  As Representatives of the
  several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019

Dear Sirs:

       Imperial Credit Mortgage Holdings, Inc., a Maryland corporation (the
"Company"), proposes to sell an aggregate of 2,500,000 shares (the "Firm
Shares") of the Company's Common Stock, $.01 par value per share (the "Common
Stock"), to you and to the other underwriters named in Schedule I (collectively,
the "Underwriters"), for whom you are acting as representatives (the
"Representatives"). The Company has also agreed to grant to you and the other
Underwriters an option (the "Option") to purchase up to an additional 375,500
shares of Common Stock (the "Option Shares") on the terms and for the purposes
set forth in Section 1(b).  The Firm Shares and the Option Shares are
hereinafter collectively referred to as the "Shares."

       The initial public offering price per share for the Shares and the
purchase price per share for the Shares

 
                                                                               2



to be paid by the several Underwriters shall be agreed upon by the Company and
the Representatives, acting on behalf of the several Underwriters, and such
agreement shall be set forth in a separate written instrument substantially in
the form of Exhibit A hereto (the "Price Determination Agreement").  The Price
Determination Agreement may take the form of an exchange of any standard form of
written telecommunication among the Company and the Representatives and shall
specify such applicable information as is indicated in Exhibit A hereto.  The
offering of the Shares will be governed by this Agreement, as supplemented by
the Price Determination Agreement.  From and after the date of the execution and
delivery of the Price Determination Agreement, this Agreement shall be deemed to
incorporate, and, unless the context otherwise indicates, all references
contained herein to "this Agreement" and to the phrase "herein" shall be deemed
to include the Price Determination Agreement.

       The Company confirms as follows its agreements with the Representatives
and the several other Underwriters.


       1.   Agreement to Sell and Purchase.
            ------------------------------ 
            (a) On the basis of the representations, warranties and agreements
of the Company herein contained and subject to all the terms and conditions of
this Agreement, the Company agrees to sell to each Underwriter named below, and
each Underwriter, severally and not jointly, agrees to purchase from the Company
at the purchase price

 
                                                                               3

per share for the Firm Shares to be agreed upon by the Representatives and the
Company in accordance with Section 1(c) or 1(d) of this Agreement and set forth
in the Price Determination Agreement, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I, plus such additional number
of Firm Shares which such Underwriter may become obligated to purchase pursuant
to Section 8 hereof.  If the Company elects to rely on Rule 430A (as
hereinafter defined), Schedule I may be attached to the Price Determination
Agreement.
          (b) Subject to all the terms and conditions of this Agreement, the
Company grants the Option to the several Underwriters to purchase, severally and
not jointly, up to 375,500 Option Shares from the Company at the same price per
share as the Underwriters shall pay for the Firm Shares.  The Option may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the 45th day after the date of this Agreement (or, if
the Company has elected to rely on Rule 430A, on or before the 45th day after
the date of the Price Determination Agreement), upon written or telegraphic
notice (the "Option Shares Notice") by the Representatives to the Company no
later than 12:00 noon, New York City time, at least two and no more than five
business days before the date specified for closing in the Option Shares

 
                                                                               4

Notice (the "Option Closing Date") setting forth the aggregate number of Option
Shares to be purchased and the time and date for such purchase.  On the Option
Closing Date, the Company will issue and sell to the Underwriters the number
of Option Shares set forth in the Option Shares Notice, and each Underwriter
will purchase such percentage of the Option Shares as is equal to the
percentage of Firm Shares that such Underwriter is purchasing, as adjusted by
the Representatives in such manner as they deem advisable to avoid fractional
shares.
          (c) If the Company has elected not to rely on Rule 430A, the initial
public offering price per share for the Firm Shares and the purchase price per
share for the Firm Shares to be paid by the several Underwriters shall be agreed
upon and set forth in the Price Determination Agreement, which shall be dated
the date hereof, and an amendment to the Registration Statement (as hereinafter
defined) containing such per share price information shall be filed before the
Registration Statement becomes effective.
          (d) If the Company has elected to rely on Rule 430A, the initial
public offering price per share for the Firm Shares and the purchase price per
share for the Firm Shares to be paid by the several Underwriters shall be agreed
upon and set forth in the Price Determination Agreement.  In the event such
price has not been agreed upon and the Price Determination Agreement has not
been executed by

 
                                                                               5

the close of business on the fourteenth business day following the date on
which the Registration Statement becomes effective, this Agreement shall
terminate forthwith, without liability of any party to any other party except
that Sections 4(i), 4(o) and 6 shall remain in effect.

       2.   Delivery and Payment.
            -------------------- 

       Delivery of the Firm Shares shall be made to the Representatives for the
accounts of the Underwriters against payment of the purchase price by credit to
the account of the Company with the Depository Trust Company.  Such payments
shall be made at 10:00 a.m., New York City time, on                  , 1996 or
                                                    -------------- --
at such time on such other date as may be agreed upon by the Company and the
Representatives, but in no event later than 10 days after such date (such date
is hereinafter referred to as the "Closing Date").

       To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.

       The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to the
respective Underwriters shall be borne by the Company.  The Company will pay

 
                                                                               6

and save each Underwriter and any subsequent holder of the Shares harmless from
any and all liabilities with respect to or resulting from any failure or delay
in paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Firm Shares and Option Shares.

       3.   Representations and Warranties of the Company.
            --------------------------------------------- 
       The Company represents, warrants and covenants to each Underwriter that:
            (a) A registration statement (Registration No.         ) on Form
                                                           --------
S-11 relating to the Shares, including a preliminary prospectus and such
amendments to such registration statement as may have been required to the date
of this Agreement, has been prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a preliminary
prospectus as contemplated by Rule 430 or Rule 430A ("Rule 430A") of the Rules
and Regulations included at any time as part of the registration statement.
Copies of such registration statement and amendments and of each related
preliminary prospec-

 
                                                                               7

tus have been delivered to the Representatives. If such registration statement
has not become effective, a further amendment to such registration statement,
including a form of final prospectus, necessary to permit such registration
statement to become effective will be filed promptly by the Company with the
Commission. If such registration statement has become effective, a final
prospectus containing information permitted to be omitted at the time of
effectiveness by Rule 430A will be filed by the Company with the Commission in
accordance with Rule 424(b) of the Rules and Regulations promptly after
execution and delivery of the Price Determination Agreement. The term
"Registration Statement" means the registration statement as amended at the time
it becomes or became effective (the "Effective Date"), including financial
statements and all exhibits and any information deemed to be included by Rule
430A or Rule 434. The term "Prospectus" means the prospectus as first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no
such filing is required, the form of final prospectus included in the
Registration Statement at the Effective Date.
          (b) On the Effective Date, the date the Prospectus is first filed with
the Commission pursuant to Rule 424(b) (if required), at all times subsequent to
and including the Closing Date and, if later, the Option Closing Date, and when
any post-effective amendment to the Registra-

 
                                                                               8

tion Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement thereto), including the financial
statements included in the Prospectus, did or will comply with all applicable
provisions of the Act and the Rules and Regulations and will contain all
statements required to be stated therein in accordance with the Act and the
Rules and Regulations. On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no part of the
Registration Statement or any such amendment did or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. At the Effective Date, the date the Prospectus or any amendment or
supplement to the Prospectus is filed with the Commission and at the Closing
Date and, if later, the Option Closing Date, the Prospectus did not or will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The foregoing representations and
warranties in this Section 3(b) do not apply to any statements or omissions
made in reliance on and in conformity with information relating

 
                                                                               9

to any Underwriter furnished in writing to the Company by the Representatives
specifically for inclusion in the Registration Statement or Prospectus or any
amendment or supplement thereto.  For all purposes of this Agreement, the
legend regarding stabilization set forth on the inside front cover page of the
Prospectus, the names of the Underwriters and the amounts of the selling
concession and reallowance set forth in the Prospectus under the caption
"Underwriting" and the identification of counsel to the Underwriters in the
Prospectus under the caption "Legal Matters" constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Registration Statement, the
preliminary prospectus or the Prospectus.  The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, the preliminary prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
          (c) The only subsidiaries (as defined in the Rules and Regulations) of
the Company are Imperial Warehouse Lending Group ("IWLG") and ICI Funding Corp.
("ICIFC") (collectively, the "Subsidiaries").  The Company and each of its
Subsidiaries is, and at the Closing Date and, if later, the Option Closing Date,
will be, a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation.  The Company and

 
                                                                              10

each of its Subsidiaries has, and at the Closing Date and, if later, the Option
Closing Date, will have, full power and authority to conduct all the activities
conducted by it, to own or lease all the assets owned or leased by it and to
conduct its business as described in the Registration Statement and the
Prospectus.  The Company and each of its Subsidiaries is, and at the Closing
Date and, if later, the Option Closing Date, will be, duly licensed or qualified
to do business and in good standing as a foreign corporation in all
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to so qualify will not have a
material adverse effect on the Company or any of its Subsidiaries or their
respective business, properties, business prospects, condition (financial or
otherwise) or results of operations (a "Material Adverse Effect").  All of the
outstanding shares of the capital stock of the Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable and are
owned by the Company (other than the outstanding common stock of ICIFC, which is
owned by Imperial Credit Industries, Inc.), to the extent and as is described in
the Prospectus, free and clear of all liens, encumbrances and claims whatsoever.
Except for the stock of the Subsidiaries and as disclosed in the Registration
Statement, the Company does not own, and at the

 
                                                                              11

Closing Date and, if later, the Option Closing Date, will not own, directly or
indirectly, any shares of stock or any other equity or long-term debt securities
of any corporation or have any equity interest in any firm, partnership, joint
venture, association or other entity.  The outstanding shares of preferred stock
of ICIFC have the rights and preferences described in the Prospectus.  Complete
and correct copies of the charter and of the by-laws of the Company and its
Subsidiaries and all amendments thereto have been filed as exhibits to the
Registration Statement or delivered to the Representatives, and no changes
therein will be made subsequent to the date hereof and prior to the Closing Date
or, if later, the Option Closing Date, except such as the Representatives shall
approve.
          (d) All of the outstanding shares of Common Stock have been, and the
Shares to be issued and sold by the Company upon such issuance will be, duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive or similar right.  The description of the Common Stock in the
Registration Statement and the Prospectus is, and at the Closing Date and, if
later, the Option Closing Date, will be, complete and accurate in all respects.
Except as set forth in the Prospectus, there are no, and at the Closing Date
and, if later, the Option Closing Date, will not be, any options to purchase, or
any rights or warrants to subscribe for, or any securities or

 
                                                                              12

obligations convertible into, or any contracts, commitments, plans or
arrangements to issue or sell, any shares of capital stock of the Company, any
shares of capital stock of any Subsidiary or any such warrants, convertible
securities or obligations.  The descriptions of the Company's dividend
reinvestment plan, stock option and other stock plans or arrangements, and the
options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately present the information required to be shown with respect
to such plans, arrangements, options and rights.
          (e) The financial statements and schedules included in the
Registration Statement or the Prospectus present the consolidated financial
condition of the Company and ICIFC as of the respective dates thereof and the
consolidated results of operations and cash flows of the Company and ICIFC for
the respective periods covered thereby, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
entire period involved, except as otherwise disclosed in the Prospectus.  No
other financial statements or schedules of the Company or ICIFC are required by
the Act or the Rules and Regulations to be included in the Registration
Statement or the Prospectus.  KPMG Peat Marwick (the "Accountants"), who have
reported on such financial statements and schedules, are independent accountants
with respect to the Company as required by the Act and the Rules and

 
                                                                              13

Regulations.  The statements included in the Registration Statement with respect
to the Accountants pursuant to Item 509 of Regulation S-K of the Rules and
Regulations are true and correct in all material respects.  The selected
financial data set forth in the Prospectus under the captions "Capitalization"
and "Selected Financial Data" fairly present the information set forth therein
on the basis stated in the Registration Statement.
          (f) Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorization; and (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets.
          (g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date and, if later, the Option Closing Date, except as set forth in or
contemplated by the Registration Statement and the Prospectus, (i) there has
not been and will not have been any change in the capitalization of the Company
or any of its Subsidiaries, or in the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries, arising for

 
                                                                              14

any reason whatsoever, (ii) neither the Company nor any of its Subsidiaries
has incurred nor will it incur any material liabilities or obligations, direct
or contingent, nor has it entered into nor will it enter into any material
transactions other than pursuant to this Agreement and the transactions
referred to herein and (iii) neither the Company nor any of its Subsidiaries
has and none of them will have paid or declared any dividends or other
distributions of any kind on any class of their respective classes of capital
stock.
          (h) Neither of the Company nor any of its Subsidiaries is, and if
operated in the manner described in the Prospectus under the caption "Business"
will not be, an "investment company," an entity "controlled" by an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act").
          (i) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective officers in their capacity
as such, before or by any Federal or state court, commission, regulatory
body, administrative agency or other governmental body, domestic or foreign,
wherein an unfavor-

 
                                                                              15

able ruling, decision or finding might result in a Material Adverse
Effect.
          (j) The Company and each of its Subsidiaries has, and at the Closing
Date and, if later, the Option Closing Date, will have, (i) all governmental
licenses, permits, consents, orders, approvals and other authorizations
necessary to carry on its business as contemplated in the Prospectus, (ii)
complied in all respects with all laws, regulations and orders applicable to it
or its business and (iii) performed all its obligations required to be performed
by it, and is not, and at the Closing Date and, if later, the Option Closing
Date, will not be, in default, under any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement, lease,
contract or other agreement or instrument (collectively, a "contract or other
agreement") to which it is a party or by which its property is bound or
affected, the effect of any of which, individually or in the aggregate, might
result in a Material Adverse Effect.  To the knowledge of the Company and each
of its Subsidiaries, no other party under any contract or other agreement to
which it is a party is in default in any respect thereunder.  Neither the
Company nor any of its Subsidiaries is, nor at the Closing Date and, if later,
the Option Closing Date, will any of them be, in violation of any provision of
its charter or by-laws.

 
                                                                              16

          (k) The Company has full corporate power and authority to enter into
this Agreement.  This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company and
is enforceable against the Company in accordance with its terms, except as the
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights generally and
moratorium laws in effect from time to time and by equitable principles
restricting the availability of equitable remedies.  The execution and delivery
by the Company of, and the performance by the Company of its obligations under,
this Agreement, the consummation of the transactions contemplated hereby and
the application of the net proceeds from the offering and sale of the Shares to
be sold by the Company in the manner set forth in the Prospectus under the
caption "Use of Proceeds" will not result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of the Company or any of its
Subsidiaries pursuant to the terms or provisions of, or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or give any other party a right to terminate any of its obligations under, or
result in the acceleration of any obligation under, the charter or by-laws of
the Company or any of its Subsidiaries, any contract or other agreement to which
the Company or any of its Subsid-

 
                                                                              17

iaries is a party or by which the Company or any of its Subsidiaries or any of
its properties is bound or affected, or violate or conflict with any judgment,
ruling, decree, order, statute, rule or regulation of any court or other
governmental agency or body applicable to the business or properties of the
Company or any of its Subsidiaries the effect of any of which, individually or
in the aggregate, might have a Material Adverse Effect.
          (l) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the authorization, issuance, transfer, sale or delivery of the
Shares by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the taking by
the Company of any other action contemplated hereby, except such as have been
obtained under the Act or the Rules and Regulations and such as may be required
under state securities or Blue Sky laws or the by-laws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
purchase and distribution by the Underwriters of the Shares.
          (m) The Company and each of its Subsidiaries has good and marketable
title to all properties and assets described in the Prospectus as owned by it,
free and clear of all liens, charges, encumbrances, mortgages, security
interests, claims or restrictions, except such as are

 
                                                                              18

described in, or contemplated by, the Prospectus.  The Company and each of its
Subsidiaries has valid, subsisting and enforceable leases for the properties
described in the Prospectus as leased by it, with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such properties by the Company and such Subsidiaries.
          (n) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.  All such contracts to which the Company or any Subsidiary is a party
have been duly authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the Company or such
Subsidiary and are enforceable against the Company or such Subsidiary in
accordance with the terms thereof.
          (o) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
          (p) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action intended, or
which might reasonably be expected, to cause or result, under the Act or

 
                                                                              19

otherwise, in, or which has constituted, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares.
          (q) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement.
          (r) Prior to the Closing Date, the Shares will be duly authorized for
listing by the American Stock Exchange upon official notice of issuance.
          (s) Neither the Company nor any of its Subsidiaries is involved in any
material labor dispute nor, to the knowledge of the Company, is any such dispute
threatened.
          (t) The Company and its Subsidiaries own, or are licensed or otherwise
have the full exclusive right to use, all material trademarks and trade names
which are used in or necessary for the conduct of their respective businesses
as described in the Prospectus.  No claims have been asserted by any person to
the use of any such trademarks or trade names or challenging or questioning the
validity or effectiveness of any such trademark or trade name.  The use, in
connection with the business and operations of the Company and its Subsidiaries
of such trademarks and trade names does not, to the Company's knowledge,
infringe on the rights of any person.

 
                                                                              20

          (u) Neither the Company or any of its Subsidiaries nor to the
knowledge of the Company any officers, directors, employees or agents acting on
behalf of the Company or any of its Subsidiaries has at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any contributions to any candidate for political office
in accordance with any applicable statute, rule, regulation or ordinance
requiring such disclosure, (ii) made any payment to any local, state, federal or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or allowed by
applicable law, (iii) made any payment outside the ordinary course of business
to any purchasing or selling agent or person charged with similar duties of any
entity to which the Company or any Subsidiary sells or from which the Company or
any Subsidiary buys products for the purpose of influencing such agent or person
to buy products from or sell products to the Company or such Subsidiary, or (iv)
except as described in the Prospectus, engaged in any transaction, maintained
any bank account or used any corporate funds except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of the Company or such Subsidiary.

 
                                                                              21

          (v) As of the Closing Date and, if later, the Option Closing Date, the
Company and its Subsidiaries shall be insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the business in which it engages as described in
the Prospectus; neither the Company nor any Subsidiary has been refused any
insurance coverage sought or applied for; and the Company has no reason to
believe that it or any Subsidiary will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its proposed
business at a cost that would not result in a Material Adverse Effect.
          (w) As of the Closing Date and, if later, the Option Closing Date, the
Company shall be qualified as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"), and intends to operate in a manner so as to continue to remain so
qualified.
          (x) The Company has complied, and until the completion of the
distribution of the Shares will comply, with all of the provisions of
(including, without limitation, filing all forms required by) Section 517.075
of the Florida Securities and Investor Protection Act and regula-

 
                                                                              22

tion 3E-900.001 issued thereunder with respect to the offering and sale of the
Shares.
          (y) Neither the Company nor any of its Subsidiaries is, and if
operated in the manner described in the Prospectus under the caption "Business"
will not be, a "broker" within the meaning of Section 3(a)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act)" or a "dealer" within the
meaning of Section 3(a)(5) of the Exchange Act or required to be registered
pursuant to Section 15(a) of the Exchange Act.

       4.   Agreements of the Company.
            ------------------------- 
       The Company agrees with the several Underwriters as follows:
            (a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement, any preliminary
prospectus or the Prospectus, unless a copy thereof shall first have been
submitted to the Representatives within a reasonable period of time prior to
the filing thereof and the Representatives shall not have objected thereto in
good faith.
          (b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives promptly, and
will confirm

 
                                                                              23

such advice in writing, (1) when the Registration Statement has become effective
and when any post-effective amendment thereto becomes effective, (2) of any
request by the Commission for amendments or supplements to the Registration
Statement or the Prospectus or for additional information, (3) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose or
the threat thereof, (4) of the happening of any event during the period
mentioned in the second sentence of Section 4(e) that in the judgment of the
Company makes any statement made in the Registration Statement or the Prospectus
untrue or that requires the making of any changes in the Registration Statement
or the Prospectus in order to make the statements therein, in light of the
circumstances in which they are made, not misleading and (5) of receipt by the
Company or any Representatives or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any preliminary prospectus or the Prospectus.  If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment.  If the Company
has omitted any information from the Registration Statement pursuant to Rule
430A, the Company will use its best efforts to comply with the provisions of

 
                                                                              24

and make all requisite filings with the Commission pursuant to said Rule 430A
and to notify the Representatives promptly of all such filings.
          (c) The Company will furnish to each of the Representatives, without
charge, one signed copy of the Registration Statement and of any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto, and will furnish to the Representatives, without charge, for
transmittal to each of the other Underwriters, a copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules but without exhibits.
            (d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
          (e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many copies
of the Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request. The Company consents to the use of the Prospectus or
any amendment or supplement thereto by the several Underwriters and by all
dealers to whom the Shares may be sold, both in connection with the offering
or sale of the Shares and for any period of time thereafter during which the
Prospectus is required by law to be delivered in connection therewith. If
during such period of

 
                                                                              25

time any event shall occur which in the judgment of the Company or counsel to
the Underwriters should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading, or if it is necessary to supplement or amend the Prospectus to
comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
each of the Underwriters, without charge, such number of copies thereof as the
Representatives may reasonably request.
          (f) Prior to any public offering of the Shares by the Underwriters,
the Company will cooperate with the Representatives and counsel to the
Underwriters in connection with the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of such jurisdictions
as the Representatives may request; provided, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to general service of
process or taxation in any jurisdiction where it is not now so subject.  The
Company will advise the Representatives promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the Common
Stock for offering, sale or trading in any jurisdiction or any initiation or
threat of any proceeding for any such purpose, and in the

 
                                                                              26

event of the issuance of any order suspending such qualification, registration
or exemption, the Company, with the cooperation of the Representatives, will
make every reasonable effort to obtain the withdrawal thereof.
          (g) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives and each other Underwriter who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally to
the holders of any class of its capital stock, and will furnish to the
Representatives and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
          (h) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in which
the Effective Date falls, an earnings statement (which need not be audited but
shall be in reasonable detail) for a period of 12 months ended commencing after
the Effective Date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
          (i) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement

 
                                                                              27

is terminated, the Company will pay, or reimburse if paid by the
Representatives, all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including but not limited to
costs and expenses of or relating to (1) the preparation, printing and filing of
the Registration Statement and exhibits to it, each preliminary prospectus, the
Prospectus and any amendment or supplement to the Registration Statement or the
Prospectus, (2) the preparation and delivery of certificates representing the
Shares, (3) the printing of this Agreement, the Agreement Among Underwriters,
any Dealer Agreements and any Underwriters' Questionnaire, (4) furnishing
(including costs of shipping, mailing and courier) such copies of the
Registration Statement, the Prospectus and any preliminary prospectus, and all
amendments and supplements thereto, as may be requested for use in connection
with the offering and sale of the Shares by the Underwriters or by dealers to
whom Shares may be sold, (5) the listing of the Shares on the American Stock
Exchange, (6) any filings required to be made by the Underwriters with the NASD,
and the fees, disbursements and other charges of counsel for the Underwriters in
connection therewith, (7) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 4(f), including the fees, disbursements and other
charges of counsel to the Underwriters in

 
                                                                              28

connection therewith, and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (8) counsel to the Company,
(9) the transfer agent for the Shares and (10) the Accountants.
          (j) The Company will not use the proceeds of the sale of the Shares in
such a manner as to require the Company to be registered under the Investment
Company Act.
          (k) The Company will not at any time, directly or indirectly, take any
action intended, or which might reasonably be expected, to cause or result in,
or which will constitute, stabilization of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
          (l) The Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in the manner set forth in the
Prospectus under the caption "Use of Proceeds" and shall file such reports with
the Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
          (m) The Company will not, and the Company will cause each of Imperial 
Credit Industries, Inc., Southern Pacific Thrift and Loan and their officers,
employees and affiliates who beneficially own shares of Common Stock to enter
into agreements with the Representatives in the form set forth in Exhibit B to
the effect that they will not, for a period of 120 days after the commencement
of the public offering of the Shares,

 
                                                                              29

without the prior written consent of PaineWebber Incorporated, sell, contract to
sell, grant any option to sell, or otherwise dispose of, or require the Company
to file with the Commission a registration statement under the Act to register,
any shares of Common Stock or securities convertible into or exchangeable for
Common Stock or warrants or other rights to acquire shares of Common Stock of
which they are, or may in the future become, the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act), other than pursuant to stock
option plans or in connection with other employee incentive compensation
arrangements or the Company's dividend reinvestment plan.
          (n) The Company will not invest in futures contracts, options on
futures contracts or options on commodities unless the Company is exempt from
the registration requirements of the Commodity Exchange Act, as amended (the
"Commodity Act"), or otherwise complies with the Commodity Act.  The Company
will not engage in any activities bearing on the Commodity Act, unless such
activities are exempt from the Commodity Act or otherwise comply with the
Commodity Act.
          (o) If this Agreement shall be terminated by the Company pursuant to
any of the provisions hereof (otherwise than pursuant to Section 8) or if for
any reason the Company shall be unable to perform its obligations hereunder,
the Company will reimburse the several Underwriters

 
                                                                              30

for all out-of-pocket expenses (including the fees, disbursements and other
charges of counsel to the Underwriters) reasonably incurred by them in
connection herewith.

       5.   Conditions of the Obligations of the Underwriters.
            ------------------------------------------------- 
       In addition to the execution and delivery of the Price Determination
Agreement, the obligations of each Underwriter hereunder are subject to the
following conditions:
          (a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 p.m., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the Representatives and all filings required by Rule
424 of the Rules and Regulations and Rule 430A shall have been made.
          (b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or

 
                                                                              31

the authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus shall have been filed unless a
copy thereof was first submitted to the Representatives and the Representatives
did not object thereto in good faith, and the Representatives shall have
received certificates, dated the Closing Date and, if later, the Option Closing
Date, and signed by the Chief Executive Officer or the Chairman of the Board of
Directors of the Company and the Chief Financial Officer of the Company (who
may, as to proceedings threatened, rely upon the best of their information and
belief), to the effect of clauses (i), (ii) and (iii).
          (c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, capital stock, indebtedness,
business, business prospects, properties, management, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course of
business, in each case other than as set forth in or contemplated by the
Registration Statement and the Prospectus

 
                                                                              32

and (ii) none of the Company or any of its Subsidiaries shall have sustained any
material loss or interference with its business or properties from fire,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or any court or legislative or other governmental action,
order or decree, which is not set forth in the Registration Statement and the
Prospectus, if in the judgment of the Representatives any such development makes
it impracticable or inadvisable to consummate the sale and delivery of the
Shares by the Underwriters at the initial public offering price.
          (d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of the Subsidiaries
or any of their respective officers or directors in their capacities as such,
before or by any Federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, in which
litigation or proceeding an unfavorable ruling, decision or finding would
materially and adversely affect the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, taken as a whole.
          (e) Each of the representations and warranties of the Company
contained herein shall be true and

 
                                                                              33

correct in all material respects at the Closing Date and, with respect to the
Option Shares, at the Option Closing Date, as if made at the Closing Date and,
with respect to the Option Shares, at the Option Closing Date, and all covenants
and agreements herein contained to be performed on the part of the Company and
all conditions herein contained to be fulfilled or complied with by the Company
at or prior to the Closing Date and, with respect to the Option Shares, at or
prior to the Option Closing Date, shall have been duly performed, fulfilled or
complied with.
          (f) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
and satisfactory in form and substance to counsel for the Underwriters, from
Freshman, Marantz, Orlanski, Cooper & Klien, counsel to the Company and ICIFC,
to the effect set forth in Exhibit C.
          (g) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
from Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Underwriters, with
respect to the Registration Statement, the Prospectus and this Agreement, which
opinion shall be satisfactory in all respects to the Representatives.
          (h) On the date of the Prospectus, the Accountants shall have
furnished to the Representatives a letter, dated the date of its delivery,
addressed to the

 
                                                                              34

Representatives and in form and substance satisfactory to the Representatives,
confirming that they are independent accountants with respect to the Company as
required by the Act and the Rules and Regulations and with respect to the
financial and other statistical and numerical information contained in the
Registration Statement.  At the Closing Date and, as to the Option Shares, the
Option Closing Date, the Accountants shall have furnished to the Representatives
a letter, dated the date of its delivery, which shall confirm, on the basis of a
review in accordance with the procedures set forth in the letter from the
Accountants, that nothing has come to their attention during the period from the
date of the letter referred to in the prior sentence to a date (specified in the
letter) not more than five days prior to the Closing Date and, as to the Option
Shares, the Option Closing Date, as the case may be, which would require any
change in their letter dated the date hereof or, if the Company elects to rely
on Rule 430A, on the date of the Prospectus, if it were required to be dated and
delivered at the Closing Date and the Option Closing Date.
          (i) At the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall be furnished to the Representatives an accurate
certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the

 
                                                                              35

Company, in form and substance satisfactory to the Representatives, to the
effect that:
          (i)   Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of such
certificate, such documents are true and correct in all material respects and do
not omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not untrue or misleading and (B) in the
case of the certificate delivered at the Closing Date and, as to any Option
Shares, the Option Closing Date, since the Effective Date no event has occurred
as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein not untrue or misleading in any material
respect.
          (ii)   Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the time
such certificate is delivered, true and correct in all material respects.

          (iii)            Each of the covenants required herein to be performed
by the Company on or prior to the delivery of such certificate has been duly,
timely and fully performed and each condition herein required to be complied
with by the Company on or prior to the

 
                                                                              36

date of such certificate has been duly, timely and fully complied with.
          (j) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 4(m).
          (k) The Shares shall be qualified for sale in such states as the
Representatives may reasonably request, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
or the Option Closing Date.
          (l) Prior to the Closing Date, the Shares shall have been duly
authorized for listing by the American Stock Exchange upon official notice of
issuance.
          (m) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date and the Option Closing Date of any statement
in the Registration Statement or the Prospectus, as to the accuracy at the
Closing Date and, as to any Option Shares, the Option Closing Date, of the
representations and warranties of the Company herein, as to the performance
by the Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Representatives.

 
                                                                              37

       6.  Indemnification.
           --------------- 
          (a) The Company will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, liabilities, expenses and damages (including any and all investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding between any of the
indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted), to which they,
or any of them, may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, liabilities, expenses or damages arise out of or
are based on any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or the
Prospectus or any amendment or supplement to the Registration Statement or the
Prospectus, or the omission or alleged omission to state in such document a
material fact required to be stated in it or necessary to make the statements in
it not misleading, provided that the Company will not be liable to the extent
that such loss, claim,

 
                                                                              38

liability, expense or damage arises from the sale of the Shares in the public
offering to any person by an Underwriter and is based on an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in
conformity with information relating to any Underwriter furnished in writing to
the Company by the Representatives on behalf of any Underwriter expressly for
inclusion in the Registration Statement, any preliminary prospectus or the
Prospectus, and provided further that the Company will not be liable to any
Underwriter, the directors, officers, employees or agents of such Underwriter or
any person controlling such Underwriter with respect to any loss, claim,
liability, expense, charge or damage arising out of or based on any untrue
statement or alleged untrue statement or omission or alleged omission to state a
material fact in any preliminary prospectus which is corrected in the Prospectus
if the person asserting any such loss, claim, liability, charge or damage
purchased Shares from such Underwriter but was not sent or given a copy of the
Prospectus at or prior to the written confirmation of the sale of such Shares to
such Person.  This indemnity agreement will be in addition to any liability that
the Company might otherwise have.
          (b) Each Underwriter will indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of Section 15
of the Act or

 
                                                                              39

Section 20 of the Exchange Act, each director of the Company and each officer of
the Company who signs the Registration Statement to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only insofar as
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives on behalf of such
Underwriter expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus. This indemnity will be in addition to any
liability that each Underwriter might otherwise have.
          (c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 6 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party.  If any such action is brought

 
                                                                              40

against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the defense.
The indemnified party will have the right to employ its own counsel (including
local counsel) in any such action, but the fees, expenses and other charges of
such counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing
by the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based on advice of counsel to the indemnified party)

 
                                                                              41

between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties.  It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction (and of more than one separate firm admitted to
practice in any other relevant jurisdiction) at any one time for all such
indemnified party or parties.  All such fees, disbursements and other charges
will be reimbursed by the indemnifying party promptly as they are incurred.  An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent (which consent will not be unreasonably
withheld).  No indemnifying party shall, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated by this Section 6 (whether or not any

 
                                                                              42

indemnified party is a party thereto), unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
          (d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and any one or more of the Underwriters may be subject in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other.  The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be

 
                                                                              43

deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus.  If, but
only if, the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such proportion
as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Underwriters, on the other, with respect to the statements or omissions
which resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering.  Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or the Representatives on behalf of the Underwriters, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission.  The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 6(d) were to be determined by pro rata allocation (even
if the Underwriters

 
                                                                              44

were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein.  The amount paid or payable by an indemnified party as a
result of the loss, claim, liability, expense or damage, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include, for
purpose of this Section 6(d), any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.  Notwithstanding the provisions of this Section 6(d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it, and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.  The Underwriters' obligations to contribute as provided in
this Section 6(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof.  Any party entitled
to contribution, promptly after receipt of notice

 
                                                                              45

of commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 6(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 6(d).  No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
          (e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement, or in certificates or other instruments delivered pursuant
hereto, shall survive and remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Underwriters or
any of their controlling persons, (ii) acceptance of any of the Shares and
payment therefor or (iii) any termination of this Agreement.

       7.   Termination.
            ----------- 

       The obligations of the several Underwriters under this Agreement may be
terminated at any time on or prior to the Closing Date (or, with respect to the
Option Shares, on or prior to the Option Closing Date), by notice to the Company
from the Representatives, without liability on the part of any Underwriter to
the Company, if, prior to

 
                                                                              46

delivery and payment for the Shares (or the Option Shares, as the case may be),
in the sole judgment of the Representatives, (i) trading in any of the equity
securities of the Company shall have been suspended by the Commission, by an
exchange that lists the Shares or by the National Association of Securities
Dealers Automated Quotation National Market System, (ii) trading in securities
generally on the New York Stock Exchange shall have been suspended or limited or
minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange or by order of the Commission or any court or other
governmental authority, (iii) a general banking moratorium shall have been
declared by either Federal or New York State authorities or (iv) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any
outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred the effect of any of which is such as to make it, in the sole judgment
of the Representatives, impracticable or inadvisable to market the Shares on
the terms and in the manner contemplated by the Prospectus.

 
                                                                              47

       8.  Substitution of Underwriters.
           ---------------------------- 
       If any one or more of the Underwriters shall fail or refuse to purchase
any of the Firm Shares which it or they have agreed to purchase hereunder, and
the aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of Firm Shares, the other Underwriters shall be
obligated, severally, to purchase the Firm Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase, in the
proportions which the number of Firm Shares which they have respectively agreed
to purchase pursuant to Section 1 bears to the aggregate number of Firm Shares
which all such non-defaulting Underwriters have so agreed to purchase, or in
such other proportions as the Representatives may specify; provided that in no
event shall the maximum number of Firm Shares which any Underwriter has become
obligated to purchase pursuant to Section 1 be increased pursuant to this
Section 8 by more than one-ninth of the number of Firm Shares agreed to be
purchased by such Underwriter without the prior written consent of such
Underwriter.  If any Underwriter or Underwriters shall fail or refuse to
purchase any Firm Shares and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
exceeds one-tenth of the aggregate number of the Firm Shares and arrangements
satis-

 
                                                                              48

factory to the Representatives and the Company for the purchase of such Firm
Shares are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company for the purchase or sale of any Shares under this Agreement. In any such
case either the Representatives or the Company shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken
pursuant to this Section 8 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.

       9.   Miscellaneous.
            ------------- 
       Notice given pursuant to any of the provisions of this Agreement shall be
in writing and, unless otherwise specified, shall be mailed or delivered (a) if
to the Company, at the office of the Company, 20371 Irvine Avenue, Santa Ana
Heights, CA 92707, Attention:  Chief Financial Officer, or (b) if to the
Underwriters, to the Representatives at the offices of PaineWebber Incorporated,
1285 Avenue of the Americas, New York, New York 10019, Attention:  Corporate
Finance Department.  Any such notice shall be effective only upon receipt.  Any
notice under

 
                                                                              49

Section 7 or 8 may be made by telex or telephone, but if so made shall be
subsequently confirmed in writing.
       This Agreement has been and is made solely for the benefit of the several
Underwriters and the Company and of the controlling persons, directors and
officers referred to in Section 6, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement.  The term "successors and assigns" as used in this Agreement shall
not include a purchaser, as such purchaser, of Shares from any of the several
Underwriters.
       Any action required or permitted to be taken by the Representatives under
this Agreement may be taken by them jointly or by PaineWebber Incorporated.
       THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
OF SUCH STATE.
       This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
       In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
       This Agreement may not be amended or otherwise modified nor may any
provision hereof be waived except by an

 
                                                                              50

instrument in writing signed by the Representatives and the Company.
       Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.

                                Very truly yours,

                                IMPERIAL CREDIT MORTGAGE
                                HOLDINGS, INC.



                                By:
                                    --------------------------------------
                                    Title:


Confirmed as of the date
first above mentioned:

PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
STIFEL, NICOLAUS & COMPANY INCORPORATED
EVEREN SECURITIES, INC.
Acting on behalf of themselves
and as the Representatives
of the other several Under-
writers named in Schedule I
hereof.

By:  PAINEWEBBER INCORPORATED


By:
    -------------------------------------
    Title:


By: OPPENHEIMER & CO., INC.


By:
    -------------------------------------
    Title:

 
                                                                              51

By: STIFEL, NICOLAUS & COMPANY
     INCORPORATED


By:
    -------------------------------------
    Title:


By: EVEREN SECURITIES, INC.


By:
    -------------------------------------
    Title:

 
                                   SCHEDULE I

                                  UNDERWRITERS


PaineWebber Incorporated
Oppenheimer & Co., Inc.
Stifel, Nicolaus & Company Incorporated
EVEREN Securities, Inc.




  
                                                    ---------
                                                    2,500,000
                                                    =========

 
                                                                       EXHIBIT A



                    IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.

                             ---------------------


                         PRICE DETERMINATION AGREEMENT
                         -----------------------------


                                                                          [DATE]



PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
STIFEL, NICOLAUS & COMPANY INCORPORATED
EVEREN SECURITIES, INC.
  As Representatives of the
  several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019

Dear Sirs:

       Reference is made to the Underwriting Agreement, dated              ,
                                                              ---------- --
1996 (the "Underwriting Agreement"), among Imperial Credit Mortgage Holdings,
Inc., a Maryland corporation (the "Company") and the several Underwriters named
in Schedule I thereto or hereto (the "Underwriters"), for whom PaineWebber
Incorporated, Oppenheimer & Co., Inc., Stifel, Nicolaus & Company Incorporated
and EVEREN Securities, Inc. and are acting as representatives (the
"Representatives").  The Underwriting Agreement provides for the purchase by the
Underwriters from the Company, subject to the terms and conditions set forth
therein, of an aggregate of 2,500,000 shares (the "Firm Shares") of the
Company's common stock, par value $.01 per share.  This Agreement is the Price
Determination Agreement referred to in the Underwriting Agreement.

       Pursuant to Section 1 of the Underwriting Agreement, the Company agrees
with the Representative as follows:

            1.  The initial public offering price per share for the Firm Shares
shall be $      .
          ------
            2. The purchase price per share for the Firm Shares to be paid by
the several Underwriters shall be $        representing an amount equal to the
                                   -------
initial public offering price set forth above, less $        per share.
                                                     -------


                                                                               2
 
          3.  Any Underwriter may allow, and any dealer may reallow, a
concession, not in excess of $__ per share, to any Underwriter or to certain
other dealers.

       The Company represents and warrants to each of the Underwriters that the
representations and warranties of the Company set forth in Section 3 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.

       As contemplated by the Underwriting Agreement, attached as Schedule I is
a completed list of the several Underwriters, which shall be a part of this
Agreement and the Underwriting Agreement.

       This Agreement shall be governed by the laws of the State of New York
without regard to the conflict of laws principles of such State.

       If the foregoing is in accordance with your understanding of the
agreement among the Underwriters and the Company, please sign and return to the
Company a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement among the Underwriters and the Company in accordance with its terms
and the terms of the Underwriting Agreement.


                                 Very truly yours,

                                 IMPERIAL CREDIT MORTGAGE
                                 HOLDINGS, INC.



                                 By:
                                    ---------------------------------------
                                    Title:


                                                                               3

Confirmed as of the date
  first above mentioned:


PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
STIFEL, NICOLAUS & COMPANY INCORPORATED
EVEREN SECURITIES, INC.
Acting on behalf of themselves
and as the Representatives
of the other several Under-
writers named in Schedule I
hereof.

By: PAINEWEBBER INCORPORATED


By:
    ---------------------------------------
    Title:


By: OPPENHEIMER & CO., INC.


By:
    ---------------------------------------
    Title:


By: STIFEL, NICOLAUS & COMPANY
     INCORPORATED


By: 
    ---------------------------------------
    Title:



By:  EVEREN SECURITIES, INC.


By:
    ---------------------------------------
    Title:

 
                                                                       EXHIBIT B



                                                                       [DATE]



PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
STIFEL, NICOLAUS & COMPANY INCORPORATED
EVEREN SECURITIES, INC.
  As Representatives of the
  several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York  10019

Dear Sirs:

       In consideration of the agreement of the several Underwriters, for which
PaineWebber Incorporated, Oppenheimer & Co., Inc., Stifel, Nicolaus & Company
Incorporated and EVEREN Securities, Inc. (the "Representatives") intend to act
as Representatives to underwrite a proposed public offering (the "Offering") of
2,500,000 shares of Common Stock, par value $.01 per share (the "Common Stock")
of Imperial Credit Mortgage Holdings, Inc., a Maryland corporation (the
"Company"), as contemplated by a registration statement with respect to such
shares filed with the Securities and Exchange Commission on Form S-11
(Registration No.           ), the undersigned hereby agrees that the
                  ----------
undersigned will not, for a period of 120 days after the commencement of the
public offering of such shares, without the prior written consent of PaineWebber
Incorporated, offer to sell, sell, contract to sell, grant any option to sell,
or otherwise dispose of, or require the Company to file with the Securities and
Exchange Commission a registration statement under the Securities Act


                                                                               2

of 1933 (the "Act") to register, any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or warrants or other rights to
acquire shares of Common Stock of which the undersigned is now, or may in the
future become, the "beneficial owner" (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934), other than pursuant to employee stock
option plans, the Company's dividend reinvestment plan or in connection with
other employee incentive compensation arrangements.

       This Agreement will be governed by the laws of the State of New York
without regard to the conflict of laws principles of such State.

                                         Very truly yours,


                                         By:
                                            --------------------------------

                                 Print Name:
                                            --------------------------------

 
                                                                       Exhibit C



                         Form of Opinion of Counsel to
                             the Company and ICIFC
                         -----------------------------



       1.   The Company and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full power and authority to conduct all
the activities conducted by it, to own or lease all the assets owned or leased
by it and to conduct its business as described in the Registration Statement and
the Prospectus.  The Company is the sole record owner and to our knowledge the
sole beneficial owner of all of the capital stock of IWLG and all of the
Preferred Stock of ICIFC to the extent and as described in the Prospectus.

       2.   All of the outstanding shares of Common Stock and the shares of
capital stock of the Subsidiaries have been, and the Shares, when paid for by
the Underwriters in accordance with the terms of the Agreement will be, duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive or similar right under (i) the statutes, judicial and
administrative decisions and the rules and regulations of the governmental
agencies of the states of Maryland or California, (ii) the Company's or such
Subsidiaries' charter or by-laws or (iii) any instrument, document, contract or
other agreement referred to in the Registration Statement or any instrument,
document, contract or agreement filed as an exhibit to the


                                                                               2
 
Registration Statement.  Except as described in the Registration Statement or
the Prospectus, to our knowledge, there is no commitment or arrangement to
issue, and there are no outstanding options, warrants or other rights calling
for the issuance of, any share of capital stock of the Company or any Subsidiary
to any person or any security or other instrument that by its terms is
convertible into, exercisable for or exchangeable for capital stock of the
Company.

       3.   The number of authorized, issued and outstanding capital stock of
the Company is as set forth in the Registration Statement and the Prospectus
under the caption "Capitalization."  The description of the Common Stock and the
preferred stock of ICIFC contained in the Prospectus conforms to the terms
thereof contained in the charter of the Company and ICIFC, respectively, and is
complete and accurate in all material respects.  The form of certificate used to
represent the Common Stock is in due and proper form and complies with all
applicable statutory requirements.

       4.   The Registration Statement and the Prospectus comply in all material
respects as to form with the requirements of the Act and the Rules and
Regulations (except that we express no opinion as to financial statements,
schedules and other financial and statistical data contained in the Registration
Statement or the Prospectus).


                                                                               3
 
       5.  To our knowledge, any instrument, document, lease, license, contract
or other agreement (collectively, "Documents") required to be described or
referred to in the Registration Statement or the Prospectus has been properly
described or referred to therein and any Document required to be filed as an
exhibit to the Registration Statement has been filed as an exhibit thereto; and
no default exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any Document filed or
required to be filed as an exhibit to the Registration Statement.

       6.   To our knowledge, except as disclosed in the Registration Statement
or the Prospectus, no person or entity has the right to require the registration
under the Act of shares of Common Stock or other securities of the Company or
ICIFC by reason of the filing or effectiveness of the Registration Statement.

       7.   To our knowledge, none of the Company and any of its Subsidiaries is
in violation of its charter or by-laws or in violation of, or in default with
respect to, any law, rule, regulation, order, judgment or decree, except as may
be described in the Prospectus or such as in the aggregate do not have a
material adverse effect upon the operations, business or assets of the Company
and any of the Subsidiaries, taken as a whole.


                                                                               4
 
       8.  All descriptions in the Prospectus of statutes, regulations or legal
or governmental proceedings are accurate and present in all material respects
the information required to be shown, including those contained in the
Prospectus under the captions "Business--Regulation," "Business--Legal
Proceedings," "Certain Provisions of Maryland Law and of the Company's Charter
and By-laws," "Federal Income Tax Considerations," "ERISA Investors" and "Shares
Available for Future Sale."

       9.   The Company has full corporate power and authority to enter into the
Agreement, and the Agreement has been duly authorized, executed and delivered by
the Company, is a valid and binding agreement of the Company and is enforceable
against the Company in accordance with the terms thereof, except for the
indemnification and contribution provisions thereof, as to which we express no
opinion, and except as may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights generally and
moratorium laws in effect from time to time and by equitable principles
restricting the availability of equitable remedies.

       10.  The execution and delivery by the Company of, and the performance by
the Company of its agreements in, the Agreement do not and will not (i) violate
the charter or by-laws of the Company, (ii) breach or result in a default under,
cause the time for performance of any obligation to


                                                                               5
 
be accelerated under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company or any of its
Subsidiaries pursuant to the terms or provisions of, (x) any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement, capital lease or other evidence of indebtedness of
which we have knowledge, (y) any voting trust arrangement or any contract or
other agreement that restricts the ability of the Company to issue securities
and of which we have knowledge or (z) any Document filed as an exhibit to the
Registration Statement, (iii) breach or otherwise violate any existing
obligation of the Company under any court or administrative order, judgment or
decree of which we have knowledge or (iv) violate applicable provisions of any
statute or regulation in the states of California or Maryland or the United
States.

       11.  No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the authorization, issuance, transfer, sale or delivery of the
Shares by the Company, in connection with the execution, delivery and
performance of the Agreement by the Company or in connection with the taking by
the Company of any action contemplated thereby or, if so required, all such
consents, approvals, authorizations and orders, have been obtained and are in
full force and effect, except such as have been


                                                                               6
 
obtained under the Act and the Rules and Regulations and such as may be required
under state securities or Blue Sky laws or by the by-laws and rules of the NASD
in connection with the purchase and distribution by the Underwriters of the
Shares.  All references in this opinion to the Agreement shall include the Price
Determination Agreement.

       12.  Delivery of certificates for the Shares will transfer valid and
marketable title thereto to each Underwriter that has purchased such Shares in
good faith and without any notice of any adverse claim with respect thereto,
except for any defects therein resulting solely from any action taken by an
Underwriter.

       13.  None of the Company and any of its Subsidiaries is, and if operated
in the manner described in the Prospectus under the caption "Business" will be,
(i) an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act or (ii) a "broker" within the meaning of Section
3(a)(4) of the Exchange Act or a "dealer" within the meaning of Section 3(a)(5)
of the Exchange Act or required to be registered pursuant to Section 15(a) of
the Exchange Act.

       14.  The Shares have been duly authorized for listing by the American
Stock Exchange upon official notice of issuance.


                                                                               7
 
       We hereby confirm to you that we have been advised by the Commission that
the Registration Statement has become effective under the Act and that no order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or is threatened, pending or
contemplated.

       We hereby further confirm to you that there are no actions, suits,
proceedings or investigations pending or, to our knowledge, overtly threatened
in writing against the Company or any of its Subsidiaries or any of their
respective officers or directors in their capacities as such, before or by any
court, governmental agency or arbitrator which (i) seek to challenge the
legality or enforceability of the Agreement, (ii) seek to challenge the legality
or enforceability of any of the Documents filed, or required to be filed, as
exhibits to the Registration Statement, (iii) seek damages or other remedies
with respect to any of the Documents filed, or required to be filed, as exhibits
to the Registration Statement, (iv) except as set forth in or contemplated by
the Registration Statement and the Prospectus, seek money damages from the
Company or any of its Subsidiaries in excess of $1,000,000 or seek to impose
criminal penalties upon the Company, any of its Subsidiaries or any of their
respective officers or directors in their capacities as such and of which we
have knowledge or (v) seek to enjoin any of the business


                                                                               8
 
activities of the Company or any of its Subsidiaries or the transactions
described in the Prospectus and of which we have knowledge.

       We have participated in the preparation of the Registration Statement and
the Prospectus and, without assuming any responsibility for the accuracy,
completeness and fairness of the statements contained in the Registration
Statement or the Prospectus or any amendment or supplement thereto, nothing has
come to our attention that causes us to believe that, both as of the Effective
Date and as of the Closing Date and the Option Closing Date, the Registration
Statement, or any amendment thereto, contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that any Prospectus or any amendment or supplement thereto, at the time such
Prospectus was issued, at the time any such amended or supplemented Prospectus
was issued, at the Closing Date and the Option Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances in which they were made not misleading (except that we express
no opinion as to financial statements, schedules and other financial or
statistical data contained in the Registration Statement or the Prospectus).


                                                                               9
 
       In rendering the foregoing opinion, counsel may rely, to the extent they
deem such reliance proper, on the opinions (in form and substance reasonably
satisfactory to Underwriters' counsel) of other counsel reasonably acceptable
to Underwriters' counsel as to matters governed by the laws of jurisdictions
other than the United States and the State of California, and as to matters of
fact, upon certificates of officers of the Company and of government officials;
provided that such counsel shall state that the opinion of any other counsel is
in form satisfactory to such counsel and, in such counsel's opinion, such
counsel and the Representatives are justified in relying on such opinions of
other counsel.  Copies of all such opinions and certificates shall be furnished
to counsel to the Underwriters on the Closing Date.



                                                                     EXHIBIT 5.1

           [LETTERHEAD OF FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN]



                                 May 29, 1996



Imperial Credit Mortgage Holdings, Inc.
20371 Irvine Avenue
Santa Ana Heights, CA 92707

        Re: Imperial Credit Mortgage Holdings, Inc.
            Registration Statement on Form S-11, 
            SEC File No. 333-04011

Dear Sir/Madam:

At your request, we have examined the Registration Statement on Form S-11 (File
No. 333-04011) of Imperial Credit Mortgage Holdings, Inc., a Maryland
corporation (the "Company"), together with Amendment No. 1, the latter of which
was filed on May 29, 1996 thereto (the "Registration Statement"), exhibits filed
or to be filed in connection therewith and the form of prospectus contained
therein, which you have filed with the Securities and Exchange Commission
("SEC") in connection with the registration of 2,500,000 shares of Common Stock
$.01 par value per share (the "Common Stock"), of the Company of which up to
375,000 shares may be purchased to cover over-allotments, if any (the "Option
Stock")(together, the Common Stock and the Option Stock are the "Shares"). The
Shares are to be sold to Paine Webber Incorporated, Oppenheimer & Co., Inc.,
Stifel, Nicolaus & Company Incorporated, and EVERN Securities, Inc. as the
representatives of the several underwriters (the "Underwriters") pursuant to an
underwriting agreement to be entered into by and among the Company and the
Underwriters (the "Underwriting Agreement").

This opinion is delivered in accordance with the requirements of Item 601(b) (5)
of Regulation S-K under the Securities Act of 1933, as amended.

For purposes of this opinion, we have examined such matters of law and 
originals, or copies, certified or otherwise, identified to our satisfaction, of
such documents, corporate records and other instruments as we have deemed 
necessary. In our examination, we have assumed the genuineness of all 
signatures, the authenticity of all documents submitted to us as originals, 
the conformity to originals of all documents submitted to us as certified, 
photostatic or conformed copies, and the authenticity of the originals of all 
such latter documents. We have also assumed the due execution and delivery of 
all documents where due execution and delivery are prerequisites to the 
effectiveness thereof. We have relied upon certificates of public officials and 
certificates of officers of the Company for the accuracy of material, factual 
matters contained therein which were not independently established.

 
Based upon the foregoing and all other instruments, documents and matters 
examined for the rendering of this opinion, it is our opinion that:

     (1) subject to effectiveness of the Registration Statement with the SEC
(such Registration Statements as amended and finally declared effective, and the
form of Prospectus contained therein or subsequently filed pursuant to Rule 430A
or 424 under the Securities Act of 1933, as amended, being hereinafter referred
to as the "Registration Statement" and the "Prospectus", respectively) and to
registration or qualification under the securities laws of the states in which
the securities may be sold, upon the sale and issuance of the Shares in the
manner referred to in the Registration Statement and in accordance with the
terms of the Underwriting Agreement, and upon payment therefor, the Shares will
be legally issued, fully paid and nonassessable shares of the Common Stock of
the Company.

With respect to the opinion set forth above, we have relied upon the opinion of 
Ballard Spahr Andrews & Ingersoll, dated the date hereof, a copy of which has 
been delivered to you, as to matters of Maryland law.

We express no opinion as to the applicability or effect of any laws, orders or
judgments of any state or jurisdiction other than federal securities laws and
the substantive laws of the State of California. Further, our opinion is based
solely upon existing laws, rules and regulations, and we undertake no obligation
to advise you of any changes that may be brought to our attention after the date
hereof.

We consent to the use of our name under the caption "Legal Matters", in the 
Prospectus, constituting part of the Registration Statement, and to the filing 
of this opinion as an exhibit to the Registration Statement.

By giving you this opinion and consent, we do not admit that we are experts with
respect to any part of the Registration Statement or Prospectus within the
meaning of the term "expert" as used in Section 11 of the Securities Act of
1933, as amended, or the rules and regulations promulgated thereunder by the
SEC, nor do we admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.

                                 Very truly yours,




                                 FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN


                                                                     EXHIBIT 5.2

               [Letterhead of Ballard Spahr Andrews & Ingersoll]
                                                                     FILE NUMBER
                                                                        776257


                                 May 29, 1996


Imperial Credit Mortgage Holdings, Inc.
20371 Irvine Avenue
Santa Ana Heights, California 92707

     Re:  Registration Statement on Form S-11
          Registration No. 333-04011
          -----------------------------------

Ladies and Gentlemen:

     We have served as Maryland counsel to Imperial Credit Mortgage Holdings, 
Inc., a Maryland corporation (the "Company"), in connection with certain
matters of Maryland law arising out of the registration of 2,875,000 shares of 
Common Stock, $.01 par value per share, of the Company (the "Shares")
(including 375,000 shares pursuant to an over-allotment option granted to the 
underwriters), covered by the above-referenced Registration Statement, and all 
amendments thereto (the "Registration Statement"), under the Securities Act of 
1933, as amended (the "1933 Act").  Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in the Registration
Statement.

     In connection with our representation of the Company, and as a basis for
the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):

     1.  The Registration Statement and the related form of final prospectus
included therein in the form in which it was transmitted to the Securities and 
Exchange Commission under the 1933 Act;

     2.  The charter of the Company, certified as of a recent date by the State 
Department of Assessments and Taxation of Maryland (the "SDAT");

 
Imperial Credit Mortgage Holdings, Inc.
May 29, 1996
Page 2


     3.  The Bylaws of the Company, certified as of a recent date by its 
Secretary;

     4.  Resolutions adopted by the Board of Directors and stockholders of the 
Company relating to the sale, issuance and registration of the Shares, certified
as of a recent date by the Secretary of the Company;

     5.  The form of certificate representing a Share;

     6.  A certificate of the SDAT as to the good standing of the Company, dated
May 29, 1996;

     7.  A certificate executed by Richard J. Johnson, Secretary of the Company,
dated May 29, 1996;

     8.  Such other documents and matters as we have deemed necessary or 
appropriate to express the opinion set forth in this letter, subject to the 
assumptions, limitations and qualifications stated herein.

     In expressing the opinion set forth below, we have assumed, and so far as 
is known to us there are no facts inconsistent with, the following:

     1.  Each of the parties (other than the Company) executing any of the 
Documents has duly and validly executed and delivered each of the Documents to 
which such party is a signatory, and such party's obligations set forth therein 
are legal, valid and binding.

     2.  Each individual executing any of the Documents on behalf of a party 
(other than the Company) is duly authorized to do so.

     3.  Each individual executing any of the Documents is legally competent to 
do so.

    4.  All Documents submitted to us as originals are authentic.  All Documents
submitted to us as certified or photostatic copies conform to the original 
documents.  All signatures on all such Documents are genuine.  All public 
records reviewed or relied upon by us or on our behalf are true and complete.  
All statements and information contained in the Documents are true and 
complete.  There are no oral or written modifications or amendments to the 
Documents, by action or conduct of the parties or otherwise.


Imperial Credit Mortgage Holdings, Inc.
May 29, 1996
Page 3 




        The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.

        Based upon the foregoing and subject to the assumptions, limitations 
and qualifications stated herein, it is our opinion that:

        1. The Company is a corporation duly incorporated and existing under 
and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.

        2. The Shares have been duly and validly authorized and, when and if 
delivered against payment therefor in accordance with the resolutions of the 
Board of Directors of the Company authorizing their issuance, will be duly and
validly issued, fully paid and nonassessable.

        The foregoing opinion is limited to the laws of the State of Maryland
and we do not express any opinion herein concerning any other law. We express
no opinion as to compliance with the securities (or "blue sky") laws or the real
estate syndication laws of the State of Maryland.

        We assume no obligation to supplement this opinion if any applicable law
changes after the date hereof or if we become aware of any fact that might 
change the opinion expressed herein after the date hereof.

        This opinion is being furnished to you solely for submission to the 
Securities and Exchange Commission as an exhibit to the Registration 
Statement and, accordingly, may not be relied upon by, quoted in any manner to, 
or delivered to any other person or entity (other than Freshman, Marantz, 
Orlanski, Cooper & Klein, counsel to the Company, and Latham & Watkins, tax 
counsel to the Company) without, in each instance, our prior written consent.

 
Imperial Credit Mortgage Holdings, Inc. 
May 29, 1996 
Page 4



        We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the 1993 Act.

                                        Very truly yours, 



                                        Ballard Spahr Andrews & Ingersoll


                                                                     EXHIBIT 8.1

                         [LETTERHEAD LATHAM & WATKINS]



                                 May 29, 1996





Imperial Credit Mortgage Holdings, Inc.
20371 Irvine Avenue
Santa Ana Heights, California 92707

        Re:  Registration Statement on Form S-11
             -----------------------------------

Ladies and Gentlemen:

        We have acted as tax counsel to Imperial Credit Mortgage Holdings, Inc.,
a Maryland corporation (the "Company"), in connection with the sale by the 
company of up to 2,875,000 shares of common stock ("Common Stock"), par value 
$.01 per share of the Company, pursuant to a registration statement on Form S-11
under the Securities Act of 1933, as amended, filed with the Securities and 
Exchange Commission on May 29, 1996 (such registration statement, as amended at 
the time it became effective, the "Registration Statement"). You have requested
our opinion concerning certain of the federal income tax consequences to the 
Company and the purchasers of Common Stock in connection with the sale described
above.

        This opinion is based on various facts and assumptions. In addition, 
this opinion is based upon the factual representations of the Company concerning
its business and assets as set forth in the Registration Statement.

        As tax counsel to the Company, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate for purposes of this opinion.

 
Imperial Credit Mortgage Holdings, Inc.
May 29, 1996
Page 2

        We are opening herein as to the the effect on the subject transaction 
only of the federal income tax laws of the United States and we express no 
opinion with respect to the applicability thereto, or the effect thereon, of 
other federal laws, the laws of any other jurisdiction or as to any matters of 
municipal law or the laws of any other local agencies within any state.

        Based on such facts, assumptions and representations, it is our opinion 
that the statements in the Registration Statement set forth under the caption 
"Federal Income Tax Considerations" to the extent such information constitutes 
matters of law, summaries of legal matters, or legal conclusions, have been 
reviewed by us and are accurate in all material respects.

        No opinion is expressed as to any matter not discussed herein.

        This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those described above may affect the conclusions 
stated herein.

        This opinion is rendered only to you and is solely for your use in 
connection with the Registration Statement. We hereby consent to the filing of 
this opinion as an exhibit to the Registration Statement and to the use of our 
name under the captions "Federal Income Tax Considerations" and "Legal Matters" 
in the Registration Statement. This opinion may not be relied upon by you for 
any other purpose, or furnished to, quoted to, or relied upon by any other 
person, firm or corporation for any purpose, without our prior written consent.

                                            Very truly yours,
                      
                               

                                            LATHAM & WATKINS


                                                                  EXHIBIT 10.14
 
                              SERVICING AGREEMENT

                                 by and between

                    Imperial Credit Mortgage Holdings, Inc.

                                      and

                            ICI Funding Corporation

 
                                     INDEX




Section                                                              Page
- -------                                                              ----
 
 
                                                               
1.   Definitions....................................................   1
     -----------
 
2.   Servicing Documents............................................   7
     -------------------

3.   General Duties of the Servicer.................................   8
     ------------------------------     

4.   Servicing Compensation and Expenses............................  17
     -----------------------------------     

5.   Repurchase of Defective Mortgage Loans.........................  18
     --------------------------------------     

6.   Contribution of Mortgage Loans or Undivided Interests Therein..  19
     -------------------------------------------------------------     

7.   Termination and Liabilities....................................  20
     ---------------------------     

8.   Representations and Warranties; Covenants of Servicer..........  23
     -----------------------------------------------------     

9.   Indemnification................................................  27
     ---------------     

10.  Miscellaneous..................................................  27
     -------------


 
                              SERVICING AGREEMENT


          THIS SERVICING AGREEMENT, entered into as of this      day of
                                                            ----
November, 1995, is made effective as of the effective date of the initial public
offering of Common Stock on a Registration Form S-11 of Imperial Credit Mortgage
Holdings, Inc., a Maryland corporation (the "Company"), by and between the
Company and ICI Funding Corporation, a California corporation (the "Servicer").

          WHEREAS, the Company and the Servicer desire that the Servicer service
certain of the Mortgage Loans owned by the Company;

          WHEREAS, the Servicer is engaged in the business of servicing Mortgage
Loans for investors; and

          WHEREAS, the Company and the Servicer desire to execute this Agreement
to define the rights, duties and obligations of the Servicer to the Company.

          NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, promises and agreements herein contained, the parties hereto agree as
follows;

          1.  Definitions.  Whenever used in this Agreement, the following words
              -----------                                                       
and phrases, unless the context otherwise requires, shall have the following
meanings:

          "Agreement" means this Servicing Agreement, as same may be amended
from time to time.

          "Appraisal" means an appraisal of a Residence conducted in accordance
with generally accepted standards by a Qualified Appraiser.

          "Appraised Value" means the value of a Residence as determined through
an Appraisal.

          "Assumption and Release Agreement" means a written agreement entered
into pursuant to paragraph 3(m) hereof.

          "Business Day" means any day of the week other than Saturday, Sunday
or a day which shall be in the State of

                                       1

 
California a legal holiday or a day on which banking institutions in the
State of California are authorized or obligated by law of executed to close.

          "Commitment" means the document pursuant to which the Company has
agreed to purchase Mortgage Loans from the Servicer.

          "Company Designee" means the person or entity designated by the
Company from time to time to perform, or assist in the performance of, certain
of the Company's duties and obligations under this Agreement.

          "Conforming Mortgage Loan" means any Mortgage Loan that qualifies for
purchase by government-sponsored entities such as FNMA and FHLMC.

          "Conventional Mortgage Loan" means a Mortgage Loan which is not
insured by the FHA or guaranteed by the VA.

          "Curtailments and Prepaid Installments Report" means the report, in
the form prescribed from time to time by the Company, to be provided by the
Servicer pursuant to paragraph 3(f) hereof.

          "Custodial Account" means a non-interest bearing account maintained by
the Servicer pursuant to paragraph 3(c) hereof, into which all Revenues shall be
deposited.

          "Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, insolvency, rearrangement, moratorium,
reorganization or similar debtor or relief laws affecting the rights of
creditors generally from time to time in effect.

          "Defective Mortgage Loan" shall mean any Mortgage Loan required to be
purchased pursuant to Section 5.

          "Escrow Account" means an account maintained by the Servicer pursuant
to paragraph 3(c) hereof, into which all Escrow Payments shall be deposited.

          "Escrow Payments" means all moneys collected, or required hereunder to
be collected, by the Servicer to obtain or maintain mortgage insurance and fire,
flood and other hazard insurance or for payment of fees, assessments or taxes or
other

                                       2

 
governmental or similar charges customarily required to be escrowed with
respect to Mortgage Loans or Residences.

          "Expense Advance" means an advance of funds, other than a Monthly
Advance, required hereunder to be made by the Servicer which in the judgement of
the Company is an appropriate expenditure made or to be made by the Servicer in
connection with the performance of its duties to service the Mortgage Loans,
including advances to pay all reasonable expenditures related to foreclosure
proceedings, all reasonable expenditures related to the defense of any lawsuit
to defend title to any property acquired as a result of a foreclosure and all
expenses incurred in making repairs to any property subject to a Mortgage, all
advances by the Servicer due to deficiencies in the amount of Escrow Payments
received by the Servicer and all other advances to pay expenses for any other
purposes, but excluding those advances described in paragraph 4(b)(ii) hereof.

          "FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.

          "FHA" means the Federal Housing Administration of the Department of
Housing and Urban Development of the United States of America, or any successor
thereto.

          "FHA Insurance" means insurance on mortgage loans presently issued by
the FHA under the National Housing Act of 1934, as amended.

          "FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.

          "Flood Insurance Policy" means a policy of insurance issued by the
Department of Housing and Urban Development of the United States of America
pursuant to the National Flood Insurance Act of 1968, as amended, or any other
policy conforming to FNMA requirements and providing similar coverage against
loss sustained by floods.

          "FNMA" means the Federal National Mortgage Association, or any
successor thereto.

          "Foreclosure Remittance Summary" means the report, in the form
prescribed from time to time by the Company, to be provided by the Servicer
pursuant to paragraph 3(c) hereof.

                                       3

 
          "GNMA" means the Government National Mortgage Association, or any
successor thereto.

          "Government Obligations" means direct general obligations of, or
obligations, the payment of the principal and interest of which are
unconditionally guaranteed by, the United States of America.

          "ICIFC" means ICI Funding Corporation, a California corporation.

          "Insurance Proceeds" means payments received with respect to the
Mortgage Loans under any insurance policy required to be maintained under this
Agreement.

          "Law" or "Laws" means all applicable statutes, laws, ordinances,
regulations, orders, writs, injunctions or decrees of the United States, or any
agency thereof, or any state, or political subdivision or any agency thereof, or
any court of competent jurisdiction.

          "Liquidation Proceeds" means amounts (other than Insurance Proceeds)
received in connection with the liquidation of defaulted Mortgage Loans, whether
through a trustee's sale, foreclosure sale, condemnation, taking under power of
eminent domain, conveyance in lieu of foreclosure or condemnation, or otherwise.


          "Liquidation Schedule" means the report, in the form prescribed from
time to time by the Company, to be provided by the Servicer pursuant to
paragraph 3(c) hereof.

          "Loan Purchase and Administrative Services Agreement" means an
agreement between the Company and ICIFC which, among other things, provides for
ICIFC's monitoring and administering of the servicing of Mortgage Loans by the
Servicer on behalf of the Company.

          "Loan Servicing Guidelines" means, with respect to Conforming Mortgage
Loans, the guidelines established by FNMA and FHLMC for the servicing of
Conforming Mortgage Loans which are eligible for sale to FNMA and FHLMC, as the
same may be amended from time to time and as may be modified by the Company in
connection with those Non-Conforming Mortgage Loans which are not eligible for
sale to FNMA and FHLMC.

                                       4

 
          "Monthly Advance" means with respect to any calendar month, the
aggregate amount of payments of principal and interest on the Mortgage Loans
which were due and payable on or before the first day of such month and which
were delinquent as of the close of business on the Business Day next preceding
the Remittance Date of such month (excluding from delinquent interest an amount
equal to the lesser of the amount of delinquent interest or the related
Servicing Fee), less any portion thereof which, if advanced, would constitute a
Nonrecoverable Advance.

          "Mortgage" means the instrument securing a Mortgage Loan which creates
a first lien on a Residence, subject only to Permitted Encumbrances, and which
shall be in the form prescribed from time to time by the Company.

          "Mortgage Documents" means the documents pertaining to a particular
Mortgage Loan.

          "Mortgage Loan" means any Conforming Mortgage Loan or Non-Conforming
Mortgage Loan evidenced by a Mortgage Note which is secured by the related
Mortgage for (i) financing the purchase by the Mortgagor of a Residence, or (ii)
if permitted by the Company, the refinancing of existing indebtedness secured by
the Residence, and which loan, in either case, has been purchased by the Company
and serviced under this Agreement.

          "Mortgage Note" means the promissory note executed by a Mortgagor to
evidence such Mortgagor's obligation to repay the Mortgage Loan which shall, in
the case of a Conventional Mortgage Loan, be in the form prescribed from time to
time by the Company.

          "Mortgagor" means the obligor(s) on a Mortgage Note, and/or a
subsequent owner of a Residence who has acquired same and assumed the Mortgage
Loan pursuant to paragraph 3(m) hereof.


          "New Loans Report" means the report, in the form prescribed from time
to time by the Company, to be provided by the Servicer pursuant to paragraph
3(f) hereof.

          "Non-Conforming Mortgage Loan" means any mortgage loan that does not
qualify for purchase by government-sponsored entities such as FNMA and FHLMC.

          "Nonrecoverable Advance" means any advance of funds which, in the good
faith judgement of the Servicer with the con-

                                       5

 
currence of the Company, will not ultimately be recoverable by the Servicer form
Insurance Proceeds, Liquidation Proceeds, the Mortgagor or otherwise.

          "Officer" means any duly authorized officer of the Servicer involved
in, or responsible for, the servicing of the Mortgage Loans whose name appears
on a list furnished to the Company by the Servicer, as such list may be amended
from time to time.

          "Permitted Encumbrances" means the liens resulting from current real
property taxes and assessments and only those covenants, conditions and
restrictions, rights of way, easements and other exceptions which are accepted
by FNMA and FHLMC on Mortgage Loans sold to GNMA or FHLMC and which are
customarily acceptable to lending institutions generally or to which like
properties are commonly subject and which do not materially affect the value or
marketability of the Residences.

          "Primary Mortgage Insurance Policy" means a policy of mortgage
guaranty insurance issued by a Qualified Mortgage Insurer.

          "Principal Prepayment" means any Mortgagor payment or other recovery
of principal on a Mortgage Loan which is not applied by the Servicer during the
month of receipt to a scheduled payment under the Mortgage Loan and the portion
of any Insurance Proceeds, Liquidation Proceeds or other collections
representing similar payments.

          "PUD" means a parcel of real property which contains buildings or
other improvements owned and maintained by a homeowner's association,
corporation or trust of the benefit of Mortgagors which own individual
residential units on such parcel of land and such association, corporation or
trust requires automatic, nonseverable ownership by each owner and impose
mandatory assessments on all such owners for the maintenance and for the common
use and enjoyment of all such owners.

          "Qualified Appraiser" means an appraiser who would be used by the
Servicer of the origination of a residential mortgage loan.


          "Qualified Mortgage Insurer" means a private mortgage insurer
specified in the Loan Servicing Guidelines.

                                       6

 
          "Qualified Standard Hazard Insurer" means an insurer issuing a
standard hazard insurance policy insuring a Residence, which insurer is licensed
and qualified to do business in the state where the Residence is located and is
an approved or acceptable insurer for mortgage loans which are sold to or
serviced for FNMA and FHLMC.

          "Remittance Date" means the 18th day of each calendar month.

          "Representations and Warranties" means the representations and
warranties required by FNMA and FHLMC to be made by Servicer with respect to
Mortgage Loans eligible for sale to such entities, as the same may be amended
from time to time, and as may be modified by the Company in connection with Non-
Conforming Mortgage Loans which are not eligible for sale to FNMA and FHLMC.

          "Residence" means a single family (one to four units) residential
house or PUD.

          "Revenues" means all moneys received by the Servicer representing
principal and interest payments on Mortgage Loans, including Principal
Prepayments, together with interest thereon at the rate specified in the
Mortgage Note to the date of prepayment (excluding, however, prepayment
penalties, which are deemed to be the property of the Company), Insurance
Proceeds, condemnation proceeds or proceeds received in connection with a taking
under power of eminent domain or a conveyance in lieu of condemnation and
Liquidation Proceeds.

          "Sales price" means, with respect to a Residence, the price at which
such Residence was sold.

          "Servicer Delinquency Report" means the report, in the form prescribed
from time to time by the Company, to be provided by the Servicer pursuant to
paragraph 3(f) hereof.

          "Servicer Foreclosure Recommendation" means the report, in the form
prescribed from time to time by the Company, to be provided by the Servicer
pursuant to paragraph 3(e) hereof.

          "Servicer Foreclosure Status Report" means the report, in the form
prescribed from time to time by the Company, to be provided by the Servicer
pursuant to paragraph 3(c) hereof.
                                  
                                       7

 
          "Servicer Remittance Reconciliation" means the report, in the form
prescribed from time to time by the Company, to be provided by the Servicer
pursuant to paragraph 3(c) hereof.

          "Servicing Fee" means a fee which may be retained by the Servicer with
respect to each Mortgage Loan as provided in paragraph 4(a) hereof, in a monthly
amount of not less than 25 basis points or greater than 50 basis points of the
outstanding principal balance of such Mortgage Loan on the day prior to each
scheduled monthly payment date or such amount as is allowable by
any nationally recognized statistical rating agency rating the mortgage
collateralized bonds proposed to be secured by such Mortgage Loans.  Servicing
fees will [generally] be as follows: (i) fixed rate servicing will be 25 basis
points, (ii) adjustable rate servicing will be 37.5 basis points and (iii) "B"
and "C" mortgage loans will be 50 basis points.

          "Standard Hazard Insurance Policy" means a hazard insurance policy
required to be maintained with respect to each Mortgage Loan pursuant to
paragraph 3(g) hereof.

          "Trial Balance" means the report, in the form prescribed from time to
time by the Company, to be provided by the Servicer pursuant to paragraph 3(f)
hereof.

          "VA" means the Veterans Administration of the United States of
America, or any successor thereto.

          "VA Guaranty" means a guaranty of a mortgage loan by the VA under the
Servicemen's Readjustment Act of 1944, as amended.

          2.  Servicing Documents.
              ------------------- 

          (a) Possession of Mortgage Loan Files.  The Company shall deliver, or
              ---------------------------------                                
cause to be delivered, to the Servicer those documents reasonably requested by
the Servicer of each Mortgage Loan the Company desires the Servicer to service
under this Agreement, not less than 15 days prior to the date the next payment
under such Mortgage Loan is due.  The Servicer shall review the documents upon
receipt thereof to determine whether they are sufficient for the Servicer to
perform its obligations hereunder and shall promptly notify the Company of any
deficiency.  The Servicer may microfilm all or any part of each Mortgage Loan
file including, without limitation, copies of any

                                       8

 
insurance policies. The contents of each Mortgage Loan file delivered to the
Servicer are and shall be held by the Servicer for the benefit of the Company as
the owner thereof for the sole purpose of servicing the related Mortgage Loan,
and such retention by the Servicer is in a custodial capacity only. The
ownership of each Mortgage Note, the Mortgage and the other contents of the
related Mortgage Loan file is vested in the Company and the ownership of all
records and documents with respect to the related Mortgage Loan prepared by or
which come into the possession of the Servicer shall immediately vest in the
Company and shall be retained and maintained by the Servicer at the will of the
Company in such custodial capacity only. The Servicer's records shall be
appropriately marked to clearly reflect the ownership of the related Mortgage
Loan by the Company. The Servicer shall release its custody of the consents of
any Mortgage Loan file only in accordance with written instructions from the
Company, except that where such release is required as incidental to the
Servicer's servicing of the Mortgage Loans or is in connection with a repurchase
of a Defective Mortgage Loan, such written instructions shall not be required.
In addition, the Servicer shall destroy or redeliver to the Company all
documents comprising each Mortgage Loan file, whether in microfilm form or
otherwise, as directed by the Company.

          (b) Books and Records.  Record title in the name of the Servicer to
              -----------------                                              
each Mortgage and the related Mortgage Note shall be retained by the Servicer
for the sole purpose of facilitating the servicing of the Mortgage Loans.  All
rights arising out of the Mortgage Loans including, but not limited to, all
funds received on or in connection with a Mortgage Loan shall be received and
held by the Servicer for the benefit of the Company as the owner of the Mortgage
Loans.

          (c) Cooperation; Release of Mortgage Loan Files.  Upon the payment in
              -------------------------------------------                      
full of any Mortgage Loan, or the receipt by the Servicer of a notification that
payment in full will be escrowed in a manner customary for such purposes, the
Servicer will immediately notify the Company by a certification (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment have been or will be so
received) and shall request delivery to it of the related Mortgage Loan file to
the extent that the Servicer does not already have possession of all documents
in such file.  The Company agrees, upon receipt of such certification and
request, promptly to release the related Mortgage Loan

                                       9

 
file to the Servicer. Upon any such payment in full, the Servicer is authorized
to execute an instrument of satisfaction regarding such Mortgage or to procure
from the trustee under the deed of trust which secured the Mortgage Note a deed
of full reconveyance covering the property encumbered by such deed of trust, as
the case may be, which instrument of satisfaction or deed of reconveyance shall
be recorded by the Servicer if required by Law and be delivered to the person or
persons entitled thereto. The Company agrees from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, upon request
of the Servicer and delivery to the Company of a trust receipt, to release the
related Mortgage Loan file to the Servicer and execute such documents as shall
be necessary to the prosecution of any proceedings relating to the servicing or
foreclosure of any Mortgage Loan. Such trust receipt shall obligate the Servicer
to return the Mortgage Loan file to the Company when the need therefor by the
Servicer no longer exists unless the Mortgage Loan shall be liquidated, in which
case, upon receipt of a certificate of the Servicer similar to that hereinabove
specified, the trust receipt shall be released to the Servicer.

          3.  General Duties of the Servicer.  The Servicer acknowledges that
              ------------------------------                                 
all servicing rights to the Mortgage Loans serviced hereunder belong to the
Company.  The parties agree that, subject to the provisions of paragraphs 3(1),
6 and 7 hereof, the Servicer shall service the Mortgage Loans, in the manner and
on the terms and conditions specified in the Commitment relating to such
Mortgage Loans and as set forth below:


          (a) Power and Authority.  The Servicer shall have full power and
              -------------------                                         
authority, acting alone, to do and perform any and all things which it may deem
necessary or desirable to carry out its servicing responsibilities hereunder,
unless contrary to the express provisions of this Agreement. It is understood
and agreed that the Servicer shall perform its duties as an independent
contractor and not as an agent or regular employee of the Company; that the
Servicer shall use its own equipment and employees; that the Servicer shall
exercise control over the details of its work; and that the Servicer shall be
free to pursue other job opportunities in its field. The Servicer shall have no
authority expressed or implied, to act in any manner or by any means, for or on
behalf of the Company in its capacity as Servicer, except as expressly set forth
in this Agreement.

                                       10

 
          (b)  Standards of Servicing.
               ---------------------- 

               (i) The Servicer agrees to service, as required hereunder, the
     Mortgage Loans in accordance with the Loan Servicing Guidelines, which are
     incorporated by reference as though set forth in full herein, and this
     Agreement.  The Servicer agrees that the Company may modify the Loan
     Servicing Guidelines from time to time and that after notification to the
     Servicer of any such modifications, the Servicer will comply with the Loan
     Servicing Guidelines as so modified, but in no event will the Loan
     Servicing Guidelines be modified so as to make Conforming Mortgage Loans,
     which would otherwise be eligible, ineligible for sale to FNMA and FHLMC.

               (ii) The Servicer shall perform all services and duties with
     respect to the Mortgage Loans in accordance with the standards of practice,
     diligence, prudence and competence maintained by the mortgage banking
     industry in the servicing of mortgage loans, to the extent such standards
     are not contrary to the Loan Servicing Guidelines or this Agreement.  At
     all times while the Servicer is servicing Mortgage Loans under this
     Agreement the Servicer shall maintain adequate facilities to perform its
     obligations in accordance with such standards, including, but not limited
     to, the ability to generate complete and accurate servicing reports.

               (iii)  The Company may enter into agreements from time to time,
     such as the Loan Purchase and Administrative Services Agreement, to provide
     for the monitoring and administering of the servicing of Mortgage Loans by
     the Servicer under this Agreement and other servicers under similar
     agreements as set forth in Section 3(l) hereof.

          (c) Collection of Revenues and Escrow Payments.
              ------------------------------------------ 

               (i) The Servicer shall instruct each Mortgagor that checks, money
     orders or other remittances in payment of his Mortgage Loan must be paid to
     the order of the Servicer servicing such Mortgage Loans. All moneys
     collected by the Servicer pertaining to the Mortgage Loans may be deposited
     temporarily into a clearing account maintained by the Servicer. Within one
     Business Day, the Servicer, after deduction of its Servicing Fee, shall
     with-

                                       11

 
     draw from the clearing account all amounts representing Escrow Payments
     which shall be applied in accordance with Section 3 (c)(vi), and all
     amounts representing Revenues received by the Servicer on behalf of the
     Company in accordance with the terms of this Agreement which shall be
     promptly deposited in a Custodial Account, subject to withdrawal on demand
     of the Company at any time. The deposits in such Custodial Account as well
     as any clearing account shall be fully insured by the FDIC.

               (ii) The Servicer shall remit by wire to the Company, on or
     before the Remittance Date, all amounts in the Custodial Account plus an
     amount equal to the Monthly Advance, if any, except that:  (A) any
     Principal Prepayments and any prepayment of interest which represent
     scheduled future monthly installments of principal and interest may be
     retained in the Custodial Account and may be remitted by the Servicer as if
     they were received on the scheduled due dates of such installments; (B) any
     Insurance Proceeds shall be held in the Custodial Account pending the
     determination of whether such moneys shall be applied to the repair of the
     related property or constitute Principal Prepayments; (C) any other amounts
     representing Principal Prepayments together with interest thereon at the
     rate specified in the Mortgage Note through the last day of the month of
     receipt, shall be remitted immediately upon receipt of such Principal
     Prepayments or, at the option of the Company, on the Remittance Date in the
     month following the month of receipt of such Principal Prepayments; and (D)
     prior to making the monthly remittance to the Company, the Servicer may,
     subject to its rights to retain late payment charges in accordance with
     Paragraph 4(a), withdraw any amounts from the Custodial Account
     representing late payments of principal and interest with respect to which
     the Servicer has made a Monthly Advance or representing late payment
     penalties collected by the Servicer, which funds shall be released from the
     terms and provisions of this Agreement and may be retained by the Servicer.
     If the Remittance Date is not a Business Day, the Servicer shall make its
     remittance on the next preceding Business Day.

               (iii)  The Servicer must make all Monthly Advances.  In the event
     that the Servicer excludes any amount from a Monthly Advance on the grounds
     that inclusion of such amount would constitute a Nonrecoverable Advance,

                                       12

 
     the Servicer shall indicate in writing the reasons therefor and shall
     provide such writing to the Company with its Servicer Remittance
     Reconciliation. The Company shall provide written notice to the Servicer if
     the Company does not agree with the Servicer that such amount would
     constitute a Nonrecoverable Advance. If the Company's notice indicates
     disagreement with the Servicer's determination, the Servicer shall advance
     additional amounts as indicated by the Company on or before the next
     Remittance Date. If the Servicer fails to make such additional advance, or
     any portion thereof, on or before the next Remittance Date, the Company
     shall terminate all of the Servicer's rights and obligations under this
     Agreement as provided in paragraph 7 hereof.

               (iv) After making any Monthly Advance, the Servicer may submit a
     request to the Company for reimbursement therefor.  If the Servicer (A)
     fails to remit any scheduled payment of principal and/or interest on the
     grounds that such remittance would constitute a Nonrecoverable Advance or
     obtains payment with respect to an amount of principal and/or interest from
     Insurance Proceeds or Liquidation Proceeds and (B) also receives payment
     thereof from the Mortgagor or otherwise, the Servicer shall immediately
     forward to the Company the amount of the payment received from the
     Mortgagor or other source.

               (v) The Servicer shall provide the Company (A) for each payment
     of a Mortgage Loan in full by the Mortgagor, through foreclosure or
     otherwise, with a Liquidation Schedule and, if applicable, a Foreclosure
     Remittance Summary and (B) with a Servicer Remittance Reconciliation on or
     before the fifth Business Day of each calendar month.

               (vi) All moneys received as Escrow Payments by the Servicer shall
     be held by the Servicer for the benefit of the Company and the applicable
     Mortgagor and, after an initial deposit into its clearing account in
     accordance with paragraph 3(c)(i), shall be held by the Servicer in the
     Escrow Account, consisting of such account or accounts as the Servicer is
     required to maintain for like payments made with respect to Mortgages which
     are being serviced for FNMA or FHLMC, pending application of such moneys
     pursuant to paragraph 3(d) hereof.  The Servicer shall maintain a record

                                       13

 
     of the source of each Escrow Payment and the total of such payments on
     deposit from each Mortgagor. The Escrow Account shall be an account or
     accounts fully insured by the FDIC. Interest earned, if any, on the Escrow
     Payments held by the Servicer shall not be required to be paid or credited
     to the Mortgagor unless required by Law.

          (d) Collection of Taxes, Assessments and Similar Items.  The Servicer
              --------------------------------------------------               
shall hold for the benefit of the Company and the respective Mortgagors for
which it services Mortgage Loans hereunder all moneys received by it
representing Escrow Payments.  The Servicer shall, from time to time, obtain
bills for all such items and effect payments thereof with checks drawn on the
Escrow Account maintained by it, prior to the applicable penalty or 
termination date.  In the event that any Mortgagor's Escrow Account is 
insufficient for a payment required to be made from such account, the Servicer 
shall make an Expense Advance by depositing into the Escrow Account moneys 
sufficient to cause the required payment to be made.  All moneys advanced by 
the Servicer for payment of any item for which an escrow is required under the 
Mortgage shall be added to the amount owing under the Mortgage Loan and may be 
recovered by the Servicer from the Mortgagor in the manner provided in the Loan
Servicing Guidelines.  The Servicer shall maintain adequate records of proof of
payment of all such items.  In case of a refund of a premium on a prepaid 
insurance policy, such refund shall be credited to the Mortgagor's Escrow 
Account except with respect to a cancellation, termination or transfer of such 
policy in which case the premium shall be refunded to the Mortgagor.

          (e) The Servicer to Conduct Foreclosures.  The Servicer shall be
              ------------------------------------                        
responsible for determining the necessity of instituting foreclosure action with
respect to any Mortgage Loan which it is servicing.  The Servicer shall submit
its recommendation, accompanied by a Servicer Foreclosure Recommendation, to the
Company, at such time as, in the opinion of the Servicer, foreclosure of a
Mortgage Loan shall be necessary.  If the Company approves of such
recommendation, the Company will notify the Servicer, and the Mortgage Documents
shall be released by the Company to the Servicer upon request therefor.  The
Servicer shall, within 21 days following any such release by the Company of the
Mortgage Documents, either complete the foreclosure and liquidation of the
Mortgage Loan as provided in this Agreement, or return the Mortgage Note to the
Company.  All foreclosures shall be conducted by the Servicer in accordance with
the Loan

                                       14

 
Servicing Guidelines, this Agreement and all requirements of FHA, VA or
any other insurance or guarantor providing insurance on or a guaranty of such
Mortgage Loan.  The Servicer shall select the counsel to conduct foreclosure,
subject to the right of the Company to notify the Servicer that any particular
counsel is unacceptable.  The Servicer shall take such action as is appropriate
during the foreclosure to maintain the mortgaged property in as good a condition
as it was when foreclosure proceedings commenced, ordinary wear and tear
accepted, and subject to the Loan Servicing Guidelines, shall assist the Company
in preserving, rehabilitating and/or selling any property received through a
foreclosure action, upon request by the Company, and, to the extent necessary,
in retaining an independent contractor to manage such property after
foreclosure.  In the event that the Company rejects the Servicer's
recommendation, the Servicer shall continue to service the Mortgage Loan in
accordance with the delinquency procedures under the Loan Servicing Guidelines.

          (f) Delinquency and Special Reports.  On or before the fifth Business
              -------------------------------                                  
Day of each month, the Servicer shall provide to the Company a Servicer
Delinquency Report which shall report each Mortgage Loan which was, as of the
last day of the preceding month, delinquent.  The Servicer shall also provide
the Company with a Servicer Foreclosure Recommendation/Individual
Delinquency Report as to each Mortgage Loan which was, as of the last day of the
preceding month, delinquent for 60 days or more, reporting the Servicer's
recommendation, if any.  On or before the fifth Business Day of each month, the
Servicer shall also provide to the Company a New Loans Report, a Curtailments
and Prepaid Installments Report and a Servicer Foreclosure Status Report which
shall report, with respect to each Mortgage Loan which is in foreclosure
proceedings, the progress and anticipated timing for consummation of such
proceedings.  In addition, on or before the fifth Business Day of each month,
the Servicer shall provide to the Company: (A) the Trial Balance of the Mortgage
Loans and of the Escrow Payments relating to the Mortgage Loans held by the
Servicer in each Custodial Account and Escrow Account, respectively; (B) a
reconciliation of the Servicer's Custodial Account and Escrow Account; and (C) a
copy of the most recent statement for each Custodial Account and Escrow Account
rendered by the institution with whom such accounts are maintained.  The
Servicer shall also provide to the Company, and such other persons as may from
time to time be designated by the Company to receive same, such other reports or
information

                                       15

 
regarding the Mortgage Loans being serviced by the Servicer hereunder as may be
reasonably requested by any of them.

          (g) Maintenance of Standard Hazard Insurance.  The Servicer shall
              ----------------------------------------                     
require that each Mortgagor obtain and maintain for each Mortgage Loan a
Standard Hazard Insurance Policy and, where necessary, a Flood Insurance Policy
on the Residence which is issued by a Qualified Standard Hazard Insurer and
which in full compliance with all applicable requirements of the FHA, VA or
Qualified Mortgage Insurer insuring or guaranteeing such Mortgage Loan. Such
policy shall be in an amount which is not less than the maximum insurable value
(i.e., replacement value without deduction for depreciation) of the property
securing the Mortgage Loan or 90% of the principal balance owing on such
Mortgage Loan, whichever is less, provided that at the time the Company
purchases the Mortgage Loan the amount shall not be less than 90% of the
principal amount of such Mortgage Loan. In all events, such coverage shall be in
an amount sufficient to ensure that the Company could not become a coinsurer
under the terms and conditions of the applicable policy, and such coverage shall
be at least as protective as fire and extended coverage, insuring the Company as
mortgagee under a standard mortgagee clause to the full extent of its interest
in the Residence. Such policies shall not be cancelable by the Qualified
Standard Hazard Insurer without 10 days prior notice to the Servicer. If
directed by the Company, the Servicer shall retain custody of such policies and
renewals thereof or microfilm copies thereof, as agent of the Company, and
annually shall issue a certificate to the Company certifying that the above
requirements have been met. The Servicer's obligation to require such insurance
to be maintained shall be absolute, regardless of any failure or refusal by any
Mortgagor to pay in timely fashion the premium due thereon, and the Servicer
agrees with respect to the Mortgage Loans serviced by it to indemnify and hold
the Company harmless against any loss suffered as a result of the absence of
hazard insurance or the lack of hazard insurance sufficient in amount to protect
the Company's interest with respect to any Residence. Compliance with paragraph
3(i) hereof by the Servicer shall be deemed compliance by the Servicer with its
financial obligations under this paragraph 3(g) to the extent that the insurance
maintained under paragraph 3(i) provides for the payment of such obligations.


          The Servicer shall use due diligence to ascertain any loss or damage
to the property securing the Mortgage Loan and upon obtaining knowledge thereof
shall immediately notify the

                                       16

 
Company and the qualified Standard Hazard Insurer concerned. Except as otherwise
provided by a Mortgage Loan insured under a private program, each such policy
shall provide for payment to the Company in the event of loss, and payments for
losses under any such policy shall be collected by the Servicer and held in
trust in accordance with paragraph 3(c) hereof until disbursed as instructed by
the Company or remitted as a Principal Prepayment pursuant to Paragraph 3(c)
hereof. The Servicer may, with respect to checks and payments issued under such
policies which do not exceed Five Thousand Dollar ($5,000), or such higher
amount as may be specified from time to time by the Company in accordance with
prudent mortgage investment standards, deposit such checks on behalf of the
Company into the Servicer's Custodial Account. The Servicer shall have no
authority to make any agreement with respect to the restoration or
rehabilitation of property damaged by fire or other casualty, except when the
amount of the loss is less than Five Thousand Dollars ($5,000), or such other
designated amount as provided hereinabove, subject to any applicable
requirements of FNMA and FHLMC with respect to disbursements of insurance
proceeds. The Servicer shall receive no compensation, in addition to that
provided in paragraph 4(a) hereof, for its services pursuant to this paragraph
3(g).

          (h) Maintenance of Mortgage Single Interest Hazard Insurance.  The
              --------------------------------------------------------      
Servicer may maintain a mortgage single interest hazard insurance policy with
sufficient coverage to provide hazard insurance on any property securing a
Mortgage Loan having no Standard Hazard Insurance Policy, in an amount at least
equal to the coverage required pursuant to paragraph 3(g) hereof and providing
for the payment of any deductible amount by the Servicer or the Mortgagor, and
naming the Company as insured.  All premiums advanced by the Servicer in
maintaining any such insurance shall be added to the amount owing under the
Mortgage Loan where the terms of the Mortgage Loan so permit.  Any amounts
collected by the Servicer under any such policy relating to claims regarding the
Mortgage Loans (other than amounts to be applied to the restoration or repair of
the property securing the related Mortgage Loan in the manner set forth in
paragraph 3(g) hereof) shall be remitted to the Company.

          (i) Maintenance of Primary Mortgage Insurance.  The Servicer shall
              -----------------------------------------                     
cause to be maintained with respect to each Conventional Mortgage Loan serviced
by it, a Primary Mortgage Insurance Policy issued by a Qualified Mortgage
Insurer, insuring the payment of such Mortgage Loan, to the extent that the

                                       17

 
principal amount thereof as of the date such Mortgage Loan is originated and
funded exceeds 30% of the Appraised Value or Sales Price (whichever is less) of
the Residence, in an amount so that the uninsured portion of such Mortgage Loan
does not exceed 75% of the Appraised Value of Sales Price (whichever is less).
All premiums advanced by the Servicer in maintaining any such insurance shall be
collected by the Servicer from the Mortgagor or, to the extent permitted by Law,
added to the amount owing under the Mortgage Loan.  Subject to the provisions of
paragraph 3(c) hereof, any amounts collected by the Servicer under any such
policy shall be remitted to the Company.

          (j) Maintenance of Fidelity Bond and Errors and Omissions Insurance.
              ---------------------------------------------------------------  
The Servicer hereby agrees to obtain and maintain in full force and effect
throughout the term of this Agreement, at its own expense, and shall furnish the
Company satisfactory evidence of, a blanket fidelity bond and an errors and
omissions insurance policy covering the Servicer's officers, employees and any
other persons acting on behalf of the Servicer in its capacity as the Servicer
with regard to the Mortgage Loans.  The amount of coverage shall be at least
equal to the highest amount of coverage that would be required by FNMA or FHLMC
with respect to the Servicer if the Servicer were servicing the Mortgage Loans
for FNMA or FHLMC.  In the event that any such bond or policy shall cease to be
in effect, the Servicer shall obtain from an issuer or insurer licensed in each
applicable jurisdiction and acceptable to the Company a comparable replacement
bond or policy, as the case may be.  Any amounts collected under such bond or
policy relating to the Servicer's activities in originating or servicing the
Mortgage Loans shall be remitted to the Company.  No provision of this paragraph
3(j) shall operate to diminish, restrict or otherwise limit the Servicer's
responsibilities and obligations as set forth in this Agreement.

          (k) Annual Reports.  On or before 120 days after the end of the
              --------------                                             
Servicer's fiscal year, the Servicer, at its expense, shall furnish to the
Company (A) an opinion by a firm of independent certified public accountants on
the financial position of the Servicer at the end of its fiscal year, and the
results of operations and changes in financial position of the Servicer for such
year then ended on the basis of an examination conducted in accordance with
generally accepted auditing standards and (B) a statement from the independent
certified public accountants concerning compliance with servicing standards on
the basis of an examination conducted substantially in compli-

                                       18

 
ance with the audit program for mortgages serviced for FNMA or FHLMC, the United
States Department of Housing and Urban Development Mortgagee Audit Standards or
the Uniform Single Audit Program for Mortgage Bankers, except for (1) such
exceptions as such firm shall believe to be immaterial and (2) such other
exceptions as shall be set forth in such statement.

          On or before the 60th day succeeding each anniversary of this
Agreement, the Servicer shall provide to the Company a statement with respect to
all Mortgage Loans being serviced by it certified by an Officer to the effect
that (A) all insurance is being maintained, is fully paid and complies with this
Agreement, (B) all taxes have been paid as and when due, (C) all inspections
have been made if and to the extent required by this Agreement and (D) analysis
has been made of each Mortgage Loan to ensure sufficient moneys are being
collected in escrow for the current year or, if any such certifications cannot
be made, specifying the reasons therefor and what curative action is being
taken.

          On or before the 60th day succeeding each anniversary of this
Agreement, the Servicer shall forward to the Company an annual statement,
certified by an Officer, certifying that, to the best of his knowledge upon
reasonable investigation, the Servicer's servicing of the Mortgage Loans has
been conducted in compliance with this Agreement except for (A) such exceptions
as such Officer shall believe to be immaterial and (B) such other exceptions as
shall be set forth in such statement.  Contemporaneously with such annual
statement, the Servicer shall also deliver to the company a certificate of an
Officer stating that (X) a review of the activities of the Servicer during the
preceding year with respect to performance under this Agreement has been made
under such Officer's supervision and (Y) to the best of such Officer's
knowledge, based on such review, there is, as of such date, no default by the
Servicer in the fulfillment of any of its obligations under this Agreement, or
if there is any such default known to such Officer, specifying each such default
and the nature and status thereof.

          (l) Assignment of Servicing or Subservicing Obligations.  At any time
              ---------------------------------------------------              
during the term of this Agreement, the Servicer may, with the prior written
consent of the Company, assign its servicing obligations pursuant to this
Agreement.  Any agreement to assign servicing obligations shall provide that the
assignee, must assume the servicing obligations of this Agreement

                                       19

 
with respect to the assigned Mortgage Loans for the same Servicing Fee that
would otherwise have been paid to the assignor. Furthermore, ICIFC and the
Company agree that ICIFC may enter into subcontract agreements with any third
party, pursuant to which such third party will provide such of the servicing
duties required hereunder as ICIFC deems necessary. Provided, however, that no
such arrangement, either by assignment of this Agreement or by a subcontract
agreement, as the case may be, between ICIFC and any third party shall relieve
ICIFC of any of its duties or obligations hereunder.

          (m) Assumptions.  If a Mortgage Loan contains a "due-on-sale" clause,
              -----------                                                      
the Servicer will enforce such clause in the manner set forth in this paragraph
3(m), unless otherwise provided in the Commitment relating to such Mortgage Loan
or instructed by the Company. The Servicer is not authorized to approve an
assumption request from any Mortgagor in connection with a transfer of a
Residence subject to a Mortgage Loan unless (A) an Assumption and Release
Agreement is entered into by the person to whom the Residence is to be or has
been conveyed which provides for the assumption of the indebtedness by such
person, (B) the person to whom the Residence is to be or has been conveyed meets
the requirements of all insurers providing insurance on the Mortgage Loan and
(C) the Mortgage Loan shall continue to be insured or guaranteed under any
applicable insurance policies described in paragraphs 3(g), (h), (i) and (j)
hereof. In connection with any sale or transfer of a Residence within the terms
of the "due-on-sale" clause, the Servicer shall determine the qualifications of
the person to whom the property securing the Mortgage Loan is to be conveyed and
shall, if such person is found to be qualified to assume the Mortgage Loan under
the above stated provisions of this paragraph 3(m), obtain the Company's consent
to such release of the Mortgagor and prepare an Assumption and Release Agreement
meeting the requirements of the Loan Servicing Guidelines and the certifications
as may be required by the Company from time to time. The Servicer shall deliver
a certificate, executed by an Officer, to the Company at the time of a transfer
of a Residence in connection with which the Mortgagor is being released pursuant
to this paragraph 3(m) to the effect that the release of the Mortgagor and the
Assumption and Release Agreement prepared in connection therewith meet the terms
of this paragraph 3(m), including that the person to whom the Residence is
conveyed satisfies all of the Company's credit and underwriting standards. The
Assumption and Release Agreement with such certificate and relevant
certifications shall be

                                       20

 
delivered to the Company, inserted in the related Mortgage Loan file and
thereafter be deemed a Mortgage Document.

          (n) The Servicer to Satisfy Insurance and Guaranty Requirements.  The
              -----------------------------------------------------------      
Servicer shall be responsible for causing all applicable requirements of the
FHA, VA, Qualified Mortgage Insurer and Qualified Standard Hazard Insurer to be
satisfied with respect to any Mortgage Loan which has such insurance or guaranty
so that the full benefits of such insurance or guaranty will inure to the
Company.  The Servicer shall use its best efforts to obtain compliance by the
Mortgagor or any assignee permitted by paragraph 3(m) hereof with all applicable
provisions and requirements of such insurance or guaranty in order to maintain
such insurance or guaranty in full force and effect.  Subject to the provisions
of paragraph 3(c) hereof, any amounts collected by the Servicer under any such
insurance or guaranty shall be remitted to the Company.

          4.   Servicing Compensation and Expenses.
               ----------------------------------- 

          (a) Servicing Fee.  As compensation for its activities hereunder and
              -------------                                                   
in consideration for servicing the Mortgage Loans for which it is responsible,
the Servicer shall retain, and the Company consents to the Servicer retaining
from Mortgagor payments received by it, the Servicing Fee earned by it. The
Servicing Fee shall be considered to be earned for any particular month with
respect to each Mortgage Loan for which the payment of all interest and
principal due for such month has been received by the Servicer from the
Mortgagor and has been remitted by the Servicer to the Company. In addition,
except as limited by Law and available funds, the Servicer shall be entitled to
additional reimbursement for expenses incurred by the Servicer in connection
with the receipt of Insurance Proceeds or Liquidation Proceeds upon requisition
therefor, which requisition shall be submitted to the Company in accordance with
paragraph 4(b)(ii) hereof. Additional servicing compensation in the form of late
payment charges, penalties and assumption fees or otherwise, if any, may be paid
to or retained by the Servicer to the extent provided for in the Mortgage Note
and permitted by Law and to the extent not contrary to the terms of this
Agreement.

          (b) Liability of the Servicer for Expenses.
              -------------------------------------- 

               (i) The Servicer shall be required to pay all expenses incurred
     by it in connection with its servicing

                                       21

 
     activities hereunder and shall not be entitled to reimbursement therefor,
     except as specifically provided in paragraph 4(b)(ii) hereof or as
     otherwise authorized under the Loan Servicing Guidelines. The Servicer also
     agrees to pay: (A) all costs or expenses resulting from failure by the
     Servicer to timely file claims for losses relating to Mortgage Loans
     (including the failure to file claims under the insurance policies or the
     bond referred to in paragraphs 3(g), (h), (i) and (j) hereof); (B) all
     costs and expenses resulting from failure by the Servicer to foreclose
     Mortgages relating to deficient Mortgage Loans in a manner consistent with
     paragraph 3(e) hereof; and (C) all costs and expenses incurred by the
     Company in connection with replacing the Servicer as a servicer of Mortgage
     Loans in the event of default of the Servicer under the terms and
     provisions of this Agreement. Unless the Loan Servicing Guidelines
     otherwise require, the Servicer shall, prior to expending any moneys of an
     extraordinary amount which may be reimbursable under paragraph 4(b)(ii)
     hereof, submit a request for reimbursement or an estimate of expenses
     anticipated to be incurred to the Company.

               (ii) The Servicer shall be required to make all Expense Advances.
     After making any Expense Advance, the Servicer may submit a request to the
     Company for reimbursement therefor.  If the Servicer is reimbursed for any
     such Expense Advance and also recovers all or any portion of such amounts
     from payments by or on behalf of a Mortgagor or otherwise, the Servicer
     shall immediately forward such recovered amounts to the Company.

          5.   Repurchase of Defective Mortgage Loans.  By executing this
               --------------------------------------                    
Agreement the Servicer makes the Representations and Warranties to the Company
concerning the Mortgage Loans it services for the Company. In the event the
Servicer fails to make any Representation or Warranty, or any Representation or
Warranty made by the Servicer is false or untrue, the Company may request the
Servicer to repurchase, and the Servicer shall repurchase the related Mortgage
Loan whether or not such Mortgage Loan is in default. The price which the
Servicer will pay the Company for any such Defective Mortgage Loan shall be
equal to the unpaid principal balance of the Defective Mortgage Loan as of the
date of purchase, (i) plus all interest accrued but not paid on such Defective
Mortgage Loan from the date of purchase by the Company through the date of
purchase by the Servicer, (ii) less any pre-

                                       22

 
paid but unaccrued interest on the Defective Mortgage Loan through the
date preceding the purchase date, (iii) plus any disbursements, including but
not limited to reasonable fees and out-of-pocket expenses of counsel, incurred
by the Company in enforcing the Servicer to purchase such Defective Pledged
Loan.

               6.  Contribution of Mortgage Loans or Undivided Interests
                   -----------------------------------------------------
     Therein.
     -------

               (a) Collateralized Mortgage Obligations.  The Servicer
                   -----------------------------------               
     acknowledges that the Mortgage Loans may be used to secure the issuance of
     collateralized mortgage obligations or other mortgage collateralized bonds
     which may require the retained servicing of such Mortgage Loans to be
     performed in a manner and on terms other than as set forth in this
     Agreement.  In such event, the Servicer agrees to enter into new servicing
     arrangements with the Company and/or a trustee acting on behalf of the
     holders of the collateralized mortgage obligations or mortgage
     collateralized bonds so long as the compensation to the Servicer is at
     least equivalent to the Servicing Fee payable to it hereunder with respect
     to such Mortgage Loans.  Upon the execution of any such new servicing
     agreement, this Agreement shall terminate as to the Mortgage Loans subject
     thereto.

               (b) Sales to a Trustee.  The Servicer acknowledges that the
                   ------------------                                     
     Company may sell undivided interests in Mortgage Loans for the issuance of
     pass-through mortgage certificates which may require the servicing of such
     Mortgage Loans to be performed in a manner and on terms other than as set
     forth in this Agreement.  In such event, the Servicer agrees to enter into
     servicing arrangements with the Company or a trustee acting on behalf of
     the holders of the pass-through certificates so long as the compensation to
     the Servicer is at least equivalent to the Servicing Fee payable to it
     hereunder with respect to such Mortgage Loans.  Upon the execution of any
     such new servicing agreement, this Agreement shall terminate as to the
     Mortgage Loans subject thereto.

               (c) Partial Assignments.  The Company and the Servicer
                   -------------------                               
     acknowledge and agree that the Company may make partial assignments of this
     Agreement at any time and from time to time in connection with the pooling
     of mortgage loans being serviced hereunder and the assignment of undivided
     interests therein to a third party, or in connection with the enforcement
     of this Agreement.  In the event that, pursuant to the terms and conditions
     of

                                       23

 
any applicable pooling and administration agreement, a portion of this
Agreement so assigned is terminated, such termination shall not cause a
termination of the remaining portion(s) of this Agreement not assigned or
assigned and subject to a different pooling and administration agreement.


               7.  Termination and Liabilities.
                   --------------------------- 

               (a) The Servicer Not to Resign.  The Servicer shall not have the
                   --------------------------                                  
     right to resign from the duties and obligations hereby imposed on it or to
     assign or transfer such duties and obligations or any of its rights
     hereunder, except as provided in paragraph 3(1) hereof.

               (b) Termination of the Servicer with Cause.  Upon the happening
                   --------------------------------------                     
     of any one or more of the following events the Company may, without payment
     of any penalty, terminate all of the Servicer's rights and obligations
     under this Agreement with respect to all Mortgage Loans:

               (i) Failure of the Servicer to remit to the Company pursuant to
     paragraph 3(c) hereof any Revenues received by the Servicer, failure of the
     Servicer to make any Monthly Advances or Expense Advances, including any
     failure to make Monthly Advances following any notice of disagreement as
     provided in Section 3(c)(iii), as required by this Agreement or failure of
     the Servicer to make any other advance of funds at the time and in the
     manner required by this Agreement.

               (ii) A representation or warranty of the Servicer to the Company
     shall be false in any material respect.

               (iii)  Failure of the Servicer to duly observe or perform in any
     material respect any other covenant, condition or agreement contained in
     the Loan Servicing Guidelines of this Agreement and required thereby or
     hereby to be observed or performed by the Servicer, other than as referred
     to in paragraphs 7(b)(i) and (ii) hereof, for a period of 30 days after a
     written notice to the Servicer from the Company has been sent specifying
     such failure and requesting that it be remedied; provided, however, that if
     the failure states in the notice cannot be corrected within the applicable
     period, the Company shall consent to a

                                       24

 
     reasonable extension of time if corrective action is instituted by the
     Servicer within the applicable period and diligently pursued until fully
     corrected; provided further, that if the Company determines that such
     failure cannot be corrected within such period, the Company may immediately
     terminate the Servicer pursuant to this paragraph 7(b)(iii).

               (iv) There is entered an order for relief or similar decree or
     other with respect to the Servicer by a court having jurisdiction in the
     premises in an involuntary case under the federal bankruptcy laws as now or
     hereafter constituted or under any applicable federal or state bankruptcy,
     insolvency or other similar laws or the Servicer (1) ceases or admits in
     writing its inability to pay its debts as they become due and payable, or
     makes a general assignment for the benefit of, or enters into any
     composition or arrangement with, creditors; (ii) applies for, or consents
     (by admission of material allegations of a petition or otherwise) to the
     appointment of a receiver, trustee, assignee, custodian, liquidator or
     sequestrator (or other similar official) of the Servicer or of any
     substantial part of its properties or assets, or authorizes such an
     application or consent, or proceedings seeking such appointment are
     commenced without such authorization, consent or application against the
     Servicer and continue undismissed for 60 days; (iii) authorizes or files a
     voluntary petition in bankruptcy, or applies for or consents (by admission
     of material allegations of a petition or otherwise) to the application of
     any bankruptcy, reorganization, arrangement, readjustment of debt,
     insolvency, dissolution, liquidation or other similar law of any
     jurisdiction, or authorizes such application or consent, or proceedings to
     such end are instituted against the Servicer without such authorization,
     application or consent and are approved as properly instituted and remain
     undismissed for 60 days or results in adjudication of bankruptcy or
     insolvency; or (iv) permits or suffers all or any substantial part of its
     properties or assets to be sequestered or attained by court order and the
     order remains undismissed for 60 days.

               (v) The Servicer fails to maintain delinquency rates on
     Conforming Mortgage Loans in which the Company has an interest at a level
     below that of other FHLMC

                                       25

 
     and FNMA servicers servicing mortgages of the same type in the same general
     geographical area.

               (vi) The Servicer fails to maintain delinquency rates on Non-
     Conforming Mortgage Loans in which the Company has an interest at a level
     below that of Non-Conforming Mortgage Loan servicers servicing mortgages of
     the same type in the same geographical area.

               (vii) The consolidation or merger by the Servicer into another
     entity or the permission by the Servicer for one or more other entities to
     consolidate or merge with or merge into it without the prior written
     consent of the Company.

               If any of the events specified in paragraph 7(b)(iv) above shall
     occur, the Servicer shall give written notice of such occurrence to the
     company within two days of the happening of such event.

               Any termination as a result of any event described in paragraph
     7(b) above shall be accomplished as soon as practicable by the Company so
     that required advances by the Company, or its designee, as a standby
     servicer shall be made on a timely basis.

          (c) Termination of the servicer without Cause.  The Company may
              -----------------------------------------                  
terminate this Agreement at any time, without cause, by giving 30 days' prior
written notice to the Servicer and paying a servicing termination fee to the
Servicer equal to 1.0% of the outstanding principal balance of each Mortgage
Loan being serviced hereunder.

          (d) Transfer of Servicing after Termination.  Upon the effective date
              ---------------------------------------                          
of termination of the Servicer under paragraph (b) or (c), the Servicer shall
immediately deliver or cause to be delivered to the Company: (A) all moneys held
in each Custodial Account and each Escrow Account, together with an assignment
of this Agreement from the Servicer to the Company; (B) all Revenues received by
such Servicer and not theretofore remitted to Company; and (C) within 30 days of
said termination, all files, whether in paper, microfilm or microfiche form, of
the Servicer relating to the Mortgage Loans serviced by such Servicer.  Nothing
in this Section 7(d) or in Section 7(e) shall restrict in any way the Company's
right to obtain monies in any

                                       26

 
Custodial Account and Escrow Account and any of the Mortgage Documents granted
elsewhere in.this Agreement. The Servicer agrees to indemnify and hold the
Company harmless from any and all loss, damage and expenses (including
reasonable attorneys' fees) that any of them may incur in securing the delivery
of all files, the transfer of all escrows or the remittance of all Revenues
received by the Servicer with respect to any Mortgage Loan serviced by the
Servicer. Each party shall be responsible for their respective costs and
expenses associated with such a transfer according to industry standards for
transfer.

          (e) The Servicer's Duties upon Termination.  Upon receipt by the
              --------------------------------------                      
Servicer of written notice of termination from the Company pursuant to paragraph
7(b) hereof, and upon the effective date of the notice of termination received
under paragraph (c) hereof, all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Company pursuant to and under this
paragraph 7(e); and, without limiting the foregoing, the Company is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans, the Mortgage Loan files and
related documents, or otherwise.  The Servicer agrees to cooperate with the
Company in effecting the termination of the Servicer's responsibilities and
rights hereunder, including without limitation, the transfer to the Company or
such other person or entity as the Company may designate, for administration,
all cash amounts which shall at the time be credited by the Servicer to each
Custodial Account and each Escrow Account or thereafter received with respect to
the Mortgage Loans.

          (f) The Servicer's Excused Performance.  Notwithstanding any
              ----------------------------------                      
provision in this Agreement to the contrary, there shall be no termination of,
and no liability under, this Agreement with respect to the Servicer for its
failure to duly observe or perform in any material respect any covenant,
condition or agreement contained in the Loan Servicing Guidelines or this
Agreement and required thereby or hereby to be observed or performed by the
Servicer hereunder if such failure on the part of the Servicer is directly
caused by the failure of the Company to duly observe or perform in any material
respect any covenant, condition or agreement contained in the Loan Servicing
Guidelines

                                       27

 
or this Agreement and required thereby or hereby to be observed or performed by
the Company hereunder.

          (g) Access to the Servicer's Records.  The Company and its agents may,
              --------------------------------                                  
from time to time, and upon 48 hours notice, request the Servicer to allow the
inspection and copying of any of the Servicer's books and records pertaining to
the Mortgage Loans, and the Servicer shall allow such inspections and access to
such books and records at reasonable times during the Servicer's normal business
hours and upon reasonable terms.

          (h) No Liability for Removal of the Servicer.  Notwithstanding any
              ----------------------------------------                      
provision in this Agreement to the contrary, the Company shall not be liable in
any respect for the termination of the Servicer for cause or owe any duty to the
Servicer if terminated for cause.

          (i) No Remedy Exclusive.  No remedy herein conferred upon or reserved
              -------------------                                              
to any party is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under this Agreement or existing at law or in equity.  No delay or omission to
exercise any right or power accruing under this Agreement shall impair any such
right or power, or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient.

          8.   Representations and Warranties; Covenants of Servicer.
               ----------------------------------------------------- 

          (a) By the Servicer.  The Servicer hereby reaffirms the
              ---------------                                    
representations and warranties made by it to the Company in the Commitment
relating to each Mortgage Loan serviced hereunder and, in addition, hereby
further represents and warrants to the Company that:

                   (i) The Servicer is a corporation, duly organized, validly
     existing and in good standing under the laws governing its creation and
     existence and is duly authorized and qualified to transact in each state
     where the nature of its business or property requires that it be so
     authorized and qualified any and all of its business, including the
     business contemplated by this Agreement, and possesses all requisite
     authority, power, licenses, permits and franchises to conduct any and all
     business contemplated

                                       28

 
     by this Agreement and to comply with its obligations under the terms of
     this Agreement, the performance of which have been duly authorized by all
     necessary action.

                   (ii) Neither the execution and delivery of this Agreement
     by the Servicer, nor the performance and compliance with the terms hereof
     by the Servicer will (A) violate the instruments creating the Servicer or
     governing its operations, (B) violate any Laws applicable to the Servicer
     which could have any material adverse effect whatsoever upon the validity,
     performance or enforceability of any of the terms of this Agreement or (C)
     constitute a material default (or an event which, with notice or lapse of
     time, or both, would constitute a material default) under, or result in the
     breach of, any material contract, agreement or other instrument to which
     the Servicer is a party or which may be applicable to the Servicer or any
     of its assets.

                   (iii)  The execution and delivery of this Agreement by the
     Servicer in the manner contemplated herein and the performance and
     compliance with the terms hereof by it do not require the consent or
     approval of any governmental authority or, if such consent or approval is
     required, it has been obtained, and such execution and delivery have been
     duly authorized by all necessary action on the part of the Servicer.

                   (iv) This Agreement, and all documents and instruments
     contemplated hereby which are executed and delivered by the Servicer, will,
     assuming due authorization, execution and recovery by the Company,
     constitute valid, legal and binding obligations of the Servicer,
     enforceable in accordance with their respective terms, except as the
     enforcement thereof may be limited by applicable Debtor Relief Laws or by
     the equitable principles governing the right of specific performance.

                   (v) The Servicer is not in default with respect to any
     order or decree of any court or any order, regulation or demand of any
     federal, state, municipal or governmental agency, which default might have
     consequences that would materially and adversely affect the operation of
     the Servicer or its properties or might have consequences that would affect
     its performances hereunder.

                                       29

 
                   (vi) The Servicer is not a party to or bound by any
     agreement or instruments or subject to any articles of incorporation,
     bylaws or any other corporate restriction or any judgment, order, writ,
     injunction, decree, law or regulation which now or in the future may
     materially and adversely affect the ability of the Servicer to perform its
     obligations under this Agreement or which required the consent of any third
     person to the execution of this Agreement or the performance by the
     Servicer of its obligations under this Agreement.


                   (vii)  No litigation is pending or, to the best of the
     Servicer's knowledge, threatened against the Servicer which would prohibit
     its entering into this Agreement or performing its obligations under this
     Agreement.

                   (viii)  As to Conforming Mortgage Loans, the Servicer is and
     will at all times be an FNMA- and FHLMC-approved Servicer and will comply
     in the performance of this Agreement with all reasonable rules and
     requirements of each Qualified Insurer.

                   (ix) The Servicer has assets in excess of its liabilities
     and is able to meet its debts as they become due and payable.

          (b) By the Company.  The Company represents and warrants to the
              --------------                                             
Servicer that:

                   (i) The Company is a corporation duly organized, validly
     existing and in good standing under the Laws of the State of Maryland, is
     duly qualified and in good standing to transact business as a foreign
     corporation in the State of California, and possesses all requisite
     authority, power, licenses, permits and franchises to conduct any and all
     business contemplated by this Agreement and to comply with its obligations
     under the terms of this Agreement, the performance of which have been duly
     authorized by all necessary corporate action.

                   (ii) Neither the execution and delivery of this Agreement
     by the Company, nor the performance and compliance with the terms hereof by
     the Company will (A) violate the instruments creating the Company or
     governing its operations, (B) violate any Laws applicable to the Company

                                       30

 
     which could have any material adverse effect whatsoever upon the validity,
     performance or enforceability of any of the terms of this Agreement or (C)
     constitute a material default (or an event which, with notice or lapse of
     time, or both, would constitute a material default) under, or result in the
     breach of, any material contract, agreement or other instrument to which
     the Company is a party or which may be applicable to the Company or any of
     its assets.

                   (iii) This Agreement, and all documents and instruments
     contemplated hereby, which are executed and delivered by the Company, will,
     assuming due authorization, execution and delivery to the Servicer,
     constitute valid, legal and binding obligations of the Company, enforceable
     in accordance with their respective terms, except as the enforcement
     thereof may be limited by applicable Debtor Relief Laws or by the equitable
     principles governing the right of specific performance.


                   (iv) No litigation is pending or, to the best of the
     Company's knowledge, threatened against the Company which would prohibit
     its entering into this Agreement or performing its obligations under the
     Agreement.

          (c) Additional Covenants of the Servicer.  In addition to the
              ------------------------------------                     
covenants and agreements of the Servicer set forth elsewhere in this Agreement,
the Servicer hereby covenants and agrees as follows:

                   (i) The Servicer will be: (A) at the time of origination and
     funding of any Mortgage Loan which has FHA Insurance, and at all times
     thereafter so long as the Servicer shall continue to serve in the capacity
     contemplated under the terms of this Agreement, and FHA-approved mortgagee
     and a FNMA approved seller and servicer of FHA-insured mortgages; (B) at
     the time of the origination and funding of any Mortgage Loan which has a VA
     Guaranty, and at all times thereafter so long as the Servicer shall
     continue to serve in the capacity contemplated under the terms of this
     Agreement, an eligible lender for mortgages guaranteed by the VA and a FHMA
     approved seller and servicer of VA-guaranteed mortgages; and (C) at the
     time of the origination and funding of any Conventional Mortgage Loan, and
     at all times thereafter so long as the Servicer shall continue to serve in
     the capacity contemplated under the

                                       31

 
     terms of this Agreement, a FNMA and FHLMC approved seller and servicer of
     Conventional Mortgage Loans.

                   (ii) The Servicer will comply with the following laws, rules,
     requirements and publications as now in effect and as the same may
     hereafter be amended, supplemented or superseded: (A) as to each FHA-
     insured Mortgage Loan, with the National Housing Act of 1934, as amended
     and supplemented, all rules and regulations issued thereunder and all
     administrative publications; (B) as to each Mortgage Loan guaranteed by the
     VA, with the Servicemen's Readjustment Act of 1944, as amended and
     supplemented, all rules and regulations issued thereunder and all
     administrative publications; and (C) as to each Mortgage Loan insured by a
     Primary Mortgage Insurance Policy, with all rules and requirements of the
     Qualified Mortgage Insurer in the performance of this Agreement.

                   (iii) The Servicer will comply with the provisions of: 
     Title VI of the Civil Rights Act of 1964; Title VIII of the Civil Rights
     Act of 1968, as amended by the Housing and Community Development Act of
     1974; Section 527 of the National Housing Act; The Equal Credit Opportunity
     Act; The Fair Credit Reporting Act and any applicable regulations and
     orders thereunder; Executive Order 11063, Equal Opportunity in Housing
     issued by the President of the United States on November 20, 1962; and all
     other applicable federal and state laws, regulations, and orders.


                   (iv) From time to time the Servicer will report, as more
     fully set forth in this Agreement, information relating to the Mortgage
     Loans to the Company, and such other persons as may from time to time be
     designated by the Company, and will do every act and thing which may be
     necessary or required to perform its duties under this Agreement.

                   (v) The Servicer agrees that so long as it shall continue to
     serve in the capacity contemplated under the terms of this Agreement it
     will remain in good standing under the Laws governing its creation and
     existence and qualified under the laws of each state where such
     qualification is necessary to do business in such state, will not dissolve
     or otherwise dispose of all or substantially all of its assets and will not
     voluntarily consolidate with or

                                       32

 
     merge into any other entity or permit one or more other entities to
     consolidate with or merge into it without the prior written consent of the
     Company;

                   (vi) No information, certificate of an Officer, statement
     furnished in writing or report required hereunder, delivered to the Company
     or any other person as may from time to time be designated by the Company
     to receive same, will, to the knowledge of the Servicer delivering same,
     contain any untrue statement of a material fact or omit a material fact
     necessary to make the information, certificate, statement or report not
     misleading.

          9.   Indemnification.  The Servicer shall indemnify, defend and hold
               ----------------                                               
harmless the Company, its directors, officers, employees, partners, agents,
successors and assigns, respectively, from and against any claim, action, loss,
damage, penalty, fine, cost, expense, or other liability, including all court
costs and attorneys' fees incurred in defending any claim or action or in
enforcing this indemnity resulting from or arising out of any breach of any
representation or warranty made by the Servicer in this Servicing Agreement or
in any certificate, document or instrument now or hereafter delivered to any of
the foregoing in connection with the transactions contemplated hereby, or from
any breach of, or failure by, the Servicer to observe or fulfill any conditions,
covenants or obligations to be observed or fulfilled by the Servicer under this
Servicing Agreement.

          10.  Miscellaneous.
               ------------- 

          (a) Benefit; Binding Nature.  This Agreement shall inure to the
              -----------------------                                    
benefit of and be binding upon the parties hereto and their respective
successors and assigns.

          (b) Notices.  Any notice given under this Agreement shall be in
              -------                                                    
writing and shall be sent by registered or certified mail, return receipt
requested, unless some other method of giving notice is accepted by the party to
which it is given, and shall be given by being delivered at the following
addresses of the parties hereto:

          The Company:        Imperial Credit Mortgage Holdings, Inc.
                              20371 Irvine Avenue
                              Santa Ana Heights, California 92707

                                       33

 
                              Attention:      Joseph R. Tomkinson,
                                         Chief Executive Officer

          The Servicer:       ICI Funding Corporation
                              20371 Irvine Avenue
                              Santa Ana Heights, California 92707
                              Attention:      Mary C. Glass,
                                              Senior Vice President,
                                              Operations

          Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this paragraph 10(b).

          (c) No Release.  Termination of this Agreement shall not release
              ----------                                                  
either party from any responsibility or liability that occurred prior to
termination except as is expressly released by the other party in writing.

          (d) Prior Agreements; Conflicts.  This Agreement supersedes any prior
              ---------------------------                                      
agreements and understandings between the Servicer and the Company governing the
Servicer's servicing of the Company's Mortgage Loans.  This Agreement sets forth
the entire agreement between the parties hereto as to the subject matter of this
Agreement.  None of the parties hereto shall be bound by any condition,
definition, warranty or representation with respect to the subject matter of
this Agreement, other than as expressly provided in this Agreement or hereafter
set forth in writing and signed by an authorized representative of the party to
be bound.  Notwithstanding the foregoing, the Servicer shall comply with all of
the terms and conditions set forth in the Commitment relating to each Mortgage
Loan being serviced hereunder; and in the event of a conflict between any
Commitment and this Agreement, the terms and conditions of the Commitment shall
control.

          (e) Appointment of Company Designee.  The Company shall have the right
              -------------------------------                                   
to appoint a Company Designee at any time and from time to time.

          (f) Governing Law.  This Agreement has been made and entered into in
              -------------                                                   
the State of California and the laws of said State shall govern the validity and
interpretation of this Agreement and the performance hereunder by the parties
hereto.

                                       34

 
          (g) Attorneys' Fees.  In the event that a party brings any action or
              ---------------                                                 
suit against the other party by reason of any breach of any covenant or
condition on the part of either party arising out of this Agreement, the party
in whose favor final judgment shall be entered shall be entitled to have and
recover from the other party all costs and expenses of suit, including
reasonable attorneys' fees.

          (h) Amendments.  This Agreement shall not be amended, changed,
              ----------                                                
modified, terminated or discharged in whole or in part except by an instrument
in writing signed by all parties hereto, or their respective successors or
assigns, or otherwise as provided herein.

          (i) Successors and Assigns.  This Agreement binds any successors
              ----------------------                                      
or assigns of the parties hereto as herein provided.

          (j) Severability.  The invalidity or unenforceability of any provision
              ------------                                                      
of this Agreement shall not affect the validity of any other provision, and all
other provisions shall remain in full force and effect.

          (k) No Joint Venture.  The Servicer and the Company are not partners
              ----------------                                                
or joint ventures with each other and nothing herein shall be construed to make
them such partners or joint ventures or impose any liability as such of either
of them.

          (l) Number of Days.  In computing the number of days from purposes of
              --------------                                                   
this Agreement, all days shall be counted, including days which are not Business
Days, unless it is specifically provided that only Business Days shall be
counted.  However, if the final day of any time period falls on a day which is
not a Business Day, then the final day shall be deemed to be the preceding
Business Day unless otherwise provided.

          (m) Headings; Gender.  The headings of the various paragraphs of this
              ----------------                                                 
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.  Words of any gender, used in this
Agreement shall be held and construed to include any other gender, and words in
the singular shall be held and construed to include the plural, and words in the
plural shall be held and construed to include the singular, unless the Agreement
or the context otherwise requires.

                                       35

 
          (n) Waiver.  Any forbearance by a party to this Agreement in
              ------                                                  
exercising any right or remedy under this Agreement or otherwise afforded by
applicable Laws shall not be a waiver of or preclude the exercise of that or any
other right or remedy.

          (o) Execution in Counterparts.  This Agreement may be executed in one
              -------------------------                                        
or more counterparts, any of which shall constitute an original as against any
party whose signature appears on it, and all of which shall together constitute
a single instrument.  This Agreement shall become binding when one or more
counterparts, individually or taken together, bear the signatures of both
parties.


          IN WITNESS WHEREOF, each party has caused this Agreement to be
executed by its duly authorized officer as of the day and year first above
written.


                                    IMPERIAL CREDIT MORTGAGE
                                    HOLDINGS, INC.



                                    By:_________________________
                                       Name:
                                       Title:


                                    ICI FUNDING CORPORATION



                                    By:_________________________
                                       Name:
                                       Title:

                                       36


                                                                      EXHIBIT 11


Imperial Credit Mortgage Holdings, Inc.
Statement Regarding Computation of Earnings Per Share

 
                                                       For the Period
                                        Quarter Ended           November 20, -
                                        March 31, 1996          December 31, 1995
                                        --------------          -----------------
                                                           
Primary Earnings Per Share:

Net Income                                1,693,639                  315,443

Avg. Number of Shares 
Outstanding                               4,250,000                4,250,000

Net effect of dilutive stock
options- Based on treasury stock 
method using average market price            57,158                   34,010

total average shares                      4,307,158                4,284,015

Primary Earnings Per Share (a)                 0.39                     0.07
 


(a) Fully diluted earnings per share were not materially different


 
                                                                   EXHIBIT 23.4
 
The Board of Directors
Imperial Credit Mortgage Holdings, Inc.:
 
  We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus. Our report dated January 25, 1996 contains an explanatory
paragraph stating the Company adopted the provisions of Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" for
the year ended December 31, 1995.
 
                                          KPMG Peat Marwick LLP
 
Orange County, California
May 29, 1996


 
                                                                   EXHIBIT 23.5
 
The Board of Directors
ICI Funding Corporation:
 
  We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus. Our report dated January 25, 1996 contains an explanatory
paragraph stating the Company adopted the provisions of Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" for
the year ended December 31, 1995.
 
                                          KPMG Peat Marwick LLP
 
Orange County, California
May 29, 1996

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